United States Lime & Minerals, Inc.

USLM Details

A Look at USLM’s 3QFY20 Results: United States Lime & Minerals, Inc. (NASDAQ: USLM) is involved in the production and sale of limestone and lime products. During the September 2020 quarter, the company reported revenues of $43.7 million, as compared to $43.6 million reported in the year-ago period. The company’s third-quarter revenues consisted of $2.3 million from Carthage Crushed Limestone (Carthage), which the Company acquired on July 1, 2020. Higher sales volumes, along with the increase in the average selling prices of USLM’s lime and limestone products contributed to the top-line growth. Gross profit in 3QFY20 came in at $14.2 million, up from $13.5 million reported in pcp. The company reported a net income of $9.3 million or $1.65 per share during the quarter, as compared to $9.9 million or $1.76 per share reported in the year-ago period. During the quarter, the company also declared a regular quarterly cash dividend of $0.16 per share, which was paid on 11 December 2020 to shareholders.

3QFY20 Key Results (Source: Company Reports)

Outlook: Looking ahead, the company is focused on controlling its costs and increasing its operating efficiencies to mitigate the adverse effects of the decreases in demand resulting from the COVID-19 pandemic.

Stock Recommendation: The stock of USLM gave a positive return of 20.07% during the span of three months and 4.24% in the past one-month period. The stock of the company is currently trading close to its 52-week high of $119.24. During the quarter, the company witnessed a negative impact on demand from its customers due to COVID-19 led economic slowdown, particularly in oil and gas services and power generation. However, the company is taking the necessary steps to implement cost-cutting initiatives and enhance its operational efficacy to mitigate some of the adverse effects of the pandemic. On a technical analysis front, the stock has a support level of ~$111.79 and a resistance level of ~$118.01. Considering the spike in the stock price over the last few months, current trading levels, increased expenses and COVID-19 led uncertainties, we are of the view that most of the positive factors are discounted at current trading levels. Hence, we suggest investors to wait for a better entry level and give an “Expensive” rating on the stock at the closing price of $115.4, up by 1.23% on 30 December 2020.

USLM Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Sturm, Ruger & Company, Inc.

RGR Details

RGR Closes Buyout of Marlin Firearms Assets: Sturm, Ruger & Company, Inc. (NYSE: RGR) is engaged in the manufacturing of rugged, reliable firearms for the commercial sporting market. Recently, the company stated that it has completed the acquisition of all of the Marlin Firearms assets on November 23, 2020. The purchase price of all the assets were around $28.3 million in cash. RGR is positive regarding the acquisition and is moving these assets to its Ruger facilities in order to set up manufacturing cells to produce Marlin rifles in the latter half of 2021.

3QFY20 Key Financial Results: During the September 2020 quarter, the company reported earnings of $1.39 per share, up from 27 cents per share reported in the year-ago quarter. In 3QFY20, the company’s net sales came in at $145.7 million, up from $95 million reported in the pcp. Higher production volumes led to the top-line growth. The company declared a third-quarter dividend of 56 cents per share, which was payable on 27 November 2020 to shareholders. The dividend represents about 40% of the company’s net income. Gross profit came in at $51.2 million, up from $19.9 million in the year-ago quarter. The company ended the quarter, with a cash balance of $29.65 million, compared with $35.42 million at December 2019-end. Cash generated from operations was approximately $81.9 million in the first nine months of 2020.

3QFY20 Key Results (Source: Company Reports)

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

P/E Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The stock is currently trading close to the average of its 52-week low and high level. The stock went up ~36.23% in the last nine-months period. On a technical analysis front, the stock has a support level of ~$60.49 and a resistance level of ~$75.92. We have valued the stock using a P/E multiple based illustrative relative valuation method and arrived at a target price with an upside of lower double-digit (in % terms). For the purpose, we have taken peers like Axon Enterprise Inc (NASDAQ: AAXN), Textron Inc (NYSE: TXT), and Raytheon Technologies Corp (NYSE: RTX). Considering, the current trading level, decent 3QFY20 results and liquidity position, completion of the acquisition of Marlin Firearms Assets and key risks associated with the business, we recommend a “Speculative Buy” rating on the stock at the closing price of $64.89, up by 0.31% on 30 December 2020.

RGR Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.