(Reuters) - Shares of Sturm Ruger & Co Inc (RGR.N) slid as much as 12 percent after the gun maker’s quarterly profit missed Wall Street estimates for the first time in four years due to higher costs aimed at increasing production.
After struggling to meet soaring demand through most of last year, the company spent on boosting capacity by 33 percent at its three factories, including its newest one in Mayordan, North Carolina.
Fears of new gun controls in the wake of mass shootings, such as the Newtown school massacre in December 2012, drove demand for guns in 2013, but the frenzy has since slowed as gun legislation talks have cooled.
The mandatory background checks for firearm sales in the United States fell almost 46 percent year-on-year in January, according to data from the FBI’s National Instant Criminal Background Check System (NICS).
Still, the number of checks made in January were the second-highest monthly numbers on record. The NICS data is regarded as a key indicator of firearm sales in the U.S.
“There was a big bubble effect in 2013, and that bubble has busted,” said analyst Brian Ruttenbur of CRT Capital Group.
However, he said the stock reaction was overdone as the slowdown was expected.
The gun maker’s shares fell 7.8 percent to $63.02 late Wednesday afternoon. The stock has risen more than 18 percent in the 12 months to Tuesday’s close on the New York Stock Exchange.
Sturm Ruger reported a fourth-quarter profit of $1.33 per share on Tuesday, missing the average analyst estimate of $1.38 per share, according to Thomson Reuters I/B/E/S. [ID:nBw8T3VBXa]
Sales rose 28.2 percent to $181.9 million and beat analysts’ average estimate, driven by demand for new products such as the Ruger Red Label 2 shotgun.
Reporting by Siddharth Cavale in Bangalore; Editing by Savio D'Souza and Richard Chang