BRIGGS & STRATTON CORP. $18 (New York symbol BGG; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 48.7 million; Market cap: $876.6 million; Priceto- sales ratio: 0.4; Dividend yield: 2.7%; TSINetwork Rating: Above Average; www.briggsandstratton.com) is the world’s largest maker of lawn mower engines. This business accounts for 58% of Briggs’s sales. It gets the remaining 42% by making other home and garden equipment, such as generators, pressure washers and snow blowers.
The company is seeing weaker sales in North America— partly due to this year’s drought— and in Western Europe. In response, Briggs recently closed two plants in the U.S. and one in the Czech Republic. Severance payments and related costs totalled $49.9 million, but these moves should lower the company’s annual costs by $45 million by 2014.
Briggs also plans to stop selling lawn mowers to big retail chains like Wal-Mart and Home Depot. This will cut its annual sales by $100 million, but the company’s profit margins on these items are low, so this move should improve its overall earnings.
In Briggs’s 2012 fiscal year, which ended June 30, 2012, its sales fell 2.1%, to $2.07 billion from $2.11 billion a year earlier. Engine sales fell 6.4%. However, sales of other products rose 8.3% on rising demand for portable generators in the wake of Hurricane Irene, which hit the eastern U.S. in August 2011.
Without unusual items, Briggs would have earned $57.8 million, or $1.15 a share. That’s down 8.0% from $63.2 million, or $1.25 a share, in fiscal 2011.
The company recently raised its quarterly dividend by 9.1%, to $0.12 a share from $0.11. The new annual rate of $0.48 yields 2.7%. The stock trades at 13.2 times its likely fiscal 2013 earnings of $1.36 a share.
Briggs & Stratton is a hold.
