Briggs & Stratton Corp. (BGG) is scheduled to report its second-quarter fiscal 2015 results on Wednesday, Jan 21, after the market closes.
In the first quarter of fiscal 2015, Briggs & Stratton posted adjusted loss per share of 21 cents, narrower than the prior-year quarter loss of 35 cents as well as the Zacks Consensus Estimate of a loss of 37 cents per share. The company had delivered a positive surprise of 43.24%. The company, however, had fallen short of the Zacks Consensus Estimate in the last three quarters. Overall, in the last four quarters, the company has delivered an average negative earnings surprise of 6.27%.
Will Briggs & Stratton miss earnings estimates in this quarter? Let’s see how things have shaped up.
Factors to Be Considered
The retail market for lawn and garden products is expected to increase 1-4% in the U.S. Briggs & Stratton will benefit from new product launches and increase in sales in emerging regions. The company’s acquisition of Allmand Bros., Inc. will help in the expansion of its higher margin commercial product portfolio and diversification of its business segments facilitating sales growth in the U.S. and abroad.
Moreover, the company has begun implementing restructuring actions to narrow its assortment of lower-priced Snapper consumer lawn and garden equipment and consolidate its Products segment manufacturing facilities in order to reduce costs. The company will close its McDonough, GA location in the second half of fiscal 2015 and production will be shifted to the existing facilities in Wisconsin and New York. Also, Briggs & Stratton’s continuous focus on margin growth along with geographical expansion through strategic acquisitions and cost cutting will aid growth in the near term.
For fiscal 2015, Briggs & Stratton revised its net income guidance up to the new range of $53–$63 million from $50–$60 million. The company also raised its earnings per share outlook to $1.14–$1.35 from $1.07–$1.27, without taking into account the effects of acquisitions, additional share repurchases and costs related to restructuring. In fiscal 2015, earnings related to Allmand are anticipated to be accretive to earnings by 7 to 8 cents per share, excluding expenses.
Net sales projections for fiscal 2015 also increased to the new band of $1.94–$2.00 billion from $1.88–$1.94 billion. However, operating margins are reaffirmed in a range of 4.5–5%, reflecting positive impact of the restructuring actions. The company confirmed the outlook for capital expenditures in the range of $60–$65 million.
Earnings Whispers
Our proven model does not conclusively show that Briggs & Stratton is likely to beat the Zacks Consensus Estimate in the second quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.
Zacks ESP: The Earnings ESP for Briggs & Stratton is 0.00%. This is because the Most Accurate estimate of 14 cents is in line with the Zacks Consensus Estimate.
Zacks Rank: Briggs & Stratton’s Zacks Rank #3 when combined with 0.00% ESP, makes surprise prediction difficult. We caution investors against stocks with a Zacks Rank #4 and #5 (Sell-rated stocks) going into the earnings announcement.
Stocks That Warrant a Look
Here are some stocks you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Century Aluminum Co. (CENX) has an earnings ESP of +7.81% and a Zacks Rank #1 (Strong Buy). It is expected to report results on Feb 19.
Noranda Aluminum Holding Corp. (NOR) has an earnings ESP of +50.00% and a Zacks Rank #1. It is expected to report results on Feb 18.
Zebra Technologies Corp. (ZBRA) has an earnings ESP of +65.63% and a Zacks Rank #1. It is slated to report results on Feb 18.
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