Trump Administration Set To Ease Gun Export Law: 3 Picks

Shares of U.S. gun manufacturers rallied on Sep 19, after Reuters released a report revealing Trump administration’s plans to ease export of small fire arms, including assault rifles. According to the report, four senior U.S. officials from multiple agencies informed Reuters that an amendment to the legislation is in the cards. These modifications, once implemented, will reduce regulatory costs associated with the export of small arms.

Notably, this is a significant step taken by the U.S. government to revive the gun industry that has been suffering for past few months albeit Trump's strong opposition of gun control in the nation.

Details of the Altered Arms Export Law

Per the recent Reuters report, Trump’s aides are currently chalking a plan that will transfer the surveillance of international non-military firearms sales rights from the State Department to the Commerce Department. The officials expect the White House budget office to receive a draft of the updated legislation, for review, in a next few days.

Interestingly, the changes to be made in the arms export law will need no congressional approval for enactment. The officials expect the U.S. administration to publicly announce the alterations by this fall which will be followed by a period of public comment. Subsequently, implementation of the same is anticipated to be as early as the first half of the next year.

Officials believe that the new law will be more “lenient” and cut the government red tape regarding the arms sales. However, they reaffirmed that the proposed alterations will not promote deregulation of firearms.

Why the Modification?

Trump is arguably the most weapons-friendly occupant of the Oval Office in decades. Yet in the inexplicable dynamics of the firearms market, Trump’s ruin did not provide any boost to the gun industry. Instead, the FBI’s National Instant Criminal Background Check System (NICS) reveals that there were nearly 1.6 million fewer background checks conducted in the first eight months of 2017 than in the same period last year. This indicates reduced demand for fire arms.

Therefore from the point of view of boosting the ailing gun industry and the economy’s growth in turn, the aforementioned alterations seem to be a wise strategy.

Critics’ View

Critics, in particular gun control advocates, however, remain doubtful on the proposed amendments’ impact on the economy. They believe easing of arms export rules will provide an access of state-of-the-art weapons to criminal gangs and militant groups who have used such ammunitions in U.S. mass shootings. Thus, the proposed shift will contradict Trump’s earlier vow to resist gun violence.

Gun Stocks Poised for Growth

The United States has been witnessing increased demand for non-military firearms exports of late from Canada, Australia, Thailand and Saudi Arabia, according to U.S. Census data. Therefore, if finalized, the proposed shift in the arms export regulation will significantly boost the U.S. gun industry.

Notably, the shift of arms export directive to Commerce Department is expected to increase arms sales by 15-20% annually, as projected by Lawrence Keane, senior vice president for the National Shooting Sports Foundation, a firearms industry trade association.

We have zeroed in 3 gun stocks here that have gained significantly following this news release. Considering their positive traits, investors focused in the consumer discretionary stocks can surely keep these companies in their watchlist.

Sturm, Ruger & Company, Inc. (NYSE:RGR) : This company is engaged in the design, manufacture and sale of firearms and precision metal investment castings. Its firearms include single-shot, auto-loading, bolt-action, lever action, and muzzleloading rifles in a range of hunting calibers; shotguns in three gauges; .22 caliber rimfire autoloading pistols and centerfire autoloading pistols in various calibers; single and double-action as well as muzzleloading revolvers.

Its annual earnings is expected to grow 20.9% in the next year. The company currently holds a Zacks Rank #5 (Strong Sell).

Following release of the expected alterations in favor of the arms export legislation, the company’s shares gained 13.7%, in the last trading session.

American Outdoor Brands Corporation (NASDAQ:AOBC) : The company is a manufacturer and seller of firearms and accessory products for the shooting, hunting and outdoor enthusiast. The company's product comprises pistols, revolvers, rifles, guns, handcuffs and firearm-related products and accessories.

Its earnings is expected to grow 11.2% in the next year. The company currently holds a Zacks Rank #5.

The company’s shares gained 10.1%, in the last trading session.

Vista Outdoor Inc. (NYSE:VSTO) : The company develops, manufacture and distribute optics, accessories and eyewear. Its product includes laser rangefinders, riflescopes, trail cameras, archery accessories, gun care products, mounts, powder, reloading equipment, targets as well as target systems.

Its annual earnings is expected to grow 3.1% in the next year. The company currently carries a Zacks Rank #3 (Hold).

The company’s shares rose 3.1% in the last trading session. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Bottom Line

It’s plausible, considering critics’ concern, that in reality the altered arms export law may do more harm to the society than boosting the economy. However, from an economic prospect it will boost the country’s GDP growth. If the current administration succeeds in maintaining a close vigil on the arm export deals, exhibiting a total intolerance to violence, then only the proposed changes are unlikely to have any detrimental impact on the economy.

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