2016's Record Sales Are A Distant Memory For Gun Stock Investors - Sturm Ruger & Co (NYSE:RGR)

Gun stocks Sturm Ruger & Company Inc RGR and American Outdoor Brands Corp AOBC tumbled Friday after American Outdoor missed revenue expectations and lowered its full-year earnings guidance.

Despite record-high firearms background checks in 2016, gun stocks have lagged the market in 2017. Sturm Ruger is down 0.7 percent on the year, while American Outdoor plummeted 37.5 percent.

After setting monthly records in every month leading up to the presidential election in 2016, monthly FBI firearm background checks are down year-over-year in every month of 2017 except May and August, and American Outdoor CEO James Debney said on Thursday that easing fears over more strict gun control laws are to blame.

Democratic presidential nominee Hillary Clinton made gun control one of the core components of her platform in 2016. It’s no coincidence that fearful gun enthusiasts spent the entire year buying guns out of concern that new restrictions could be on the way. With a pro-gun Republican in the White House and Republicans controlling both houses of Congress, gun buyers are now content to wait on discounts to buy, Debney said.

“We believe promotions have for the moment replaced fear-based buying as a primary driver for consumer purchases,” he said, according to MarketWatch.

Fewer background checks and potentially lower sales prices are a bad combo for gun stocks, and investors are left dealing with the fallout. American Outdoor Brands reported a 90 percent year-over-year profit decline in the third quarter.

For now, traders will be watching for the potential impact of the Concealed Carry Reciprocity Act, which was passed by the House this week. The bill would create a national system for concealed carry permits that would allow permit holders to legally cross state lines with their concealed firearms.