Shares of Briggs & Stratton Corporation BGG scaled a new 52-week high of $21.24 on Oct 12, before closing lower at $20.87. The new high came on the back of benefits expected from innovative products development, continuous focus on restructuring actions and successful business acquisitions.
This Wauwatosa, WI-based producer of air cooled gasoline engines for outdoor power equipment has a market cap of $921 million. Average volume of shares traded over the last three months is approximately 438K.
Briggs & Stratton has delivered a one-year return of about 15.8% and year-to-date return of around 2.2%. The company has outperformed the Zacks Consensus Estimate in each of the trailing four quarters with an average positive surprise of 45.24%.
Drivers
Briggs & Stratton has successfully launched new products which includeEXi engine, where users don't need to change the oil, and new InStart lithium-ion push button starting system in Europe, which excelled expectations with extremely favorable consumer reaction and sales volumes. The company has also expanded its share in the commercial markets following the successful launch of an all-new Vanguard 810cc commercial engine. Further, the introduction of a lineup of Vanguard commercial engines with electronic fuel injection, delivering up to 25% fuel savings for commercial cutters, will also support Briggs & Stratton’s product portfolio.
Briggs & Stratton also diversified its product portfolio by increasing production of higher margin products. This was accomplished by executing two acquisitions, the first one being Allmand’s, acquired at the end of last Aug 2014, which enabled the company to enter the higher margin commercial categories within the job site and rental channels. Later in May 2015, the company acquired Billy Goat, which provides higher margin complementary products for the company’s Ferris and Snapper Pro commercial cutting lineups.
Notably, during the fourth quarter of fiscal 2015, Briggs & Stratton made progress on implementing its previously announced restructuring actions to narrow its assortment of lower-priced Snapper consumer lawn and garden equipment and consolidate its Products segment’s manufacturing facilities in order to reduce costs.
The company ceased production at the McDonough, GA plant during the fiscal fourth quarter and begun producing pressure washers and snow throwers at its Milwaukee, WI plant. Incremental cost savings as a result of these actions are anticipated to be approximately $5 million to $7 million in fiscal 2016.
In addition to reinvesting in the business and completing strategic acquisitions, Briggs & Stratton returned $70 million of cash to shareholders via share repurchases and dividends. On Aug 12, Briggs & Stratton approved an 8% increase in its quarterly dividend to 13.5 cents. Further repurchases will also aid stock price appreciation.
Moreover, for fiscal 2016, Briggs & Stratton provided earnings per share outlook in the range of $1.20–$1.36, without taking into account the effects of acquisitions, additional share repurchases and costs related to restructuring. The company projected net sales for fiscal 2016 in the band of $1.90–$1.96 billion, considering modest organic growth with expectations of improvement in the U.S. and European markets.
Currently, Briggs & Stratton has a Zacks Rank #4 (Sell).
Stocks to Consider
Some better-ranked stocks in the same sector include AGCO Corporation AGCO, Berry Plastics Group, Inc. BERY and Global Brass and Copper Holdings, Inc. BRSS. All these stocks carry a Zacks Rank #1 (Strong Buy).
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