Briggs & Stratton Corp.
), reported third-quarter fiscal 2014 (ended Mar 30, 2014)
adjusted earnings of 81 cents per share, which declined 9% year
over year. The results also lagged the Zacks Consensus Estimate
of 87 cents.
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Following the earnings release, the stock price fell around 4.5%
in the trading session and eventually closed at $22.05 on Apr 25.
Excluding the restructuring income per share of 1 cent, Briggs
& Stratton posted earnings of 81 cents per share for
third-quarter 2014 as compared with 78 cents in the prior-year
quarter. Notably, the year-ago quarter figure excluded
restructuring charges of 11 cents per share.
Net sales fell 1.4% year over year to $628.4 million in the
reported quarter. However, revenues surpassed the Zacks Consensus
Estimate of $617 million. The year-over-year decrease was due to
lower sales of generators and engines.
Cost of sales dropped 1% year over year to $498.9 million.
Adjusted gross profit was $129 million as against $133 million in
the prior-year quarter. Adjusted gross margin contracted 30 basis
points (bps) year over year to 20.6%.
Engineering, selling, general and administrative expenses
increased 5.9% year over year to $74.8 million. Adjusted earnings
from operations were $54.6 million compared with $62.7 million in
the year-ago quarter.
Net sales in this segment remained flat year over year at $452
million. Net sales increased on higher sales of engines used in
lawn and garden equipment for the North American market,
partially offset by lower sales of engines used in generators and
products in Latin America and Australia. Adjusted income from
operation from the segment was $59.6 million versus $62.5 million
in the year-ago quarter.
This segment reported sales of $205 million, down 11% from the
year-ago quarter. Results suffered due to a decrease in the sale
of generators, lawn and garden equipment and a delay in the
selling season, along with unfavorable foreign exchange rates.
These were, however, partly offset by an increase in net sales of
snow throwers and related service parts. The segment reported an
adjusted loss of $4.9 million compared with an operating income
of $1 million in the year-ago quarter.
Cash and cash equivalents were $107 million as of Mar 30, 2014,
marking a substantial improvement from $22.6 million as of Mar
30, 2013. The company recorded net cash usage in operating
activities of $14 million for the period of nine months ending
Mar 30, 2014, compared with $74 million in the year-ago
Net debt as of Mar 30, 2014 was $117.8 million, down from $239.9
million as of Mar 30, 2013. Debt-to-capitalization ratio
contracted to 25% as of Mar 30, 2014 from 28% in the prior-year
On Aug 2012, the board of Briggs & Stratton authorized up to
$50 million in funds related to a share repurchase program with
an expiry date of Jun 2014. Additionally, on Jan 22, 2014, the
company declared an addition of $50 million to the buyback
program and extended the expiry to Jun 2016. During the first
nine months of fiscal 2014, the company repurchased 1,479,626
shares at an average price of $20.32 per share.
Briggs & Stratton achieved pre-tax savings of $0.8 million
during the quarter. The company is progressing well toward moving
horizontal engine manufacturing from its Auburn, AL plant to
Pre-tax restructuring costs for fiscal 2014 are expected in the
range of $6-$8 million. Moreover, the company anticipates savings
of $2 million to $4 million from these restructuring activities
in fiscal 2014.
Briggs & Stratton trimmed its net income guidance of $48-$57
million to $43-$50 million for fiscal 2014. It also lowered the
earnings per share outlook to $0.88-$1.04 from $1.00-$1.18,
without taking into account the effects of additional share
repurchases and costs related to any announced restructuring.
Net sales projection was revised at $1.85-$1.92 billion for 2014
from $1.88-$2.00 billion.
Excluding the impact of restructuring charges, operating margins
were revised from 4.5%-4.8% to 3.8%-4.2%. Capital expenditures
were lowered to the range of $45 -$50 million from the earlier
guidance of $50-$55 million.
Briggs & Stratton will benefit from strong sales of pressure
washers and engines. Moreover, its continuous focus on margin
growth and geographical expansion through strategic acquisitions
will aid growth in the near term.
Milwaukee, WI-based Briggs & Stratton is the world's largest
producer of gasoline engines for outdoor power equipment. Its
wholly owned subsidiary, Briggs & Stratton Power Products
Group LLC, is North America's top manufacturer of portable
generators and pressure washers. This subsidiary is a leader in
designing, manufacturing and marketing of standby generators and
lawn, garden and turf care products through its popular brands.
Currently, Briggs & Stratton has a Zacks Rank #5 (Sell).
However, some better-ranked stocks worth a look in the industrial
product sector include
Alamo Group, Inc.
). While Gorman-Rupp and Middleby sport a Zacks Rank #1 (Strong
Buy), Alamo Group carries a Zacks Rank #2 (Buy).