Briggs & Stratton Corp. $14 – New York symbol BGG

BRIGGS & STRATTON CORP. $14 (New York symbol BGG; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 49.8 million; Market cap: $697.2 million; WSSF Rating: Above average) is the world’s largest maker of engines for lawnmowers. It also makes other home and garden equipment such as pressure washers and snow blowers. Rising costs for gasoline and food have cut consumer spending on discretionary items such as gardening equipment. A colder-than-usual spring season also hurt sales. However, the company is doing a good job controlling costs as it cuts production to meet demand. As well, Hurricanes Gustav and Ike prompted increased sales of portable generators. Briggs should be able to keep paying its $0.88 dividend, which now yields 6.3%. Meanwhile, Briggs reported a loss for its first fiscal year ended September 30, 2008 of $0.04 a share (total $2.0 million). That’s a big improvement over the $0.42 a share ($20.8 million) it lost in the year-earlier quarter. Due to the seasonal nature of its lawnmower and gardening equipment businesses, Briggs usually loses money in its first quarter. Sales rose 24.8%, to $458.2 million from $367.1 million, as lawnmower makers replenished their falling inventories of small engines. As well, demand for snow blowers was strong as retailers built up their inventories before winter. Briggs also recently acquired Australian lawnmower maker Victa Lawncare Pty. for $24.8 million. Victa contributed $13.2 million to Briggs’ sales in the most recent quarter. Briggs’ long-term debt of $266.6 million is a high 4.6 times its fiscal 2008 cash flow. However, the company’s cost cuts should give it more cash for debt repayments as the economy improves. It also holds cash of $32.6 million or $0.66 a share. The stock now trades at 16.7 times its projected fiscal 2009 earnings of $0.84 a share. That’s reasonable in light of Briggs’ high market share. Briggs & Stratton is a buy.