BRIGGS & STRATTON CORP. $20 (New York symbol BGG; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 44.4 million; Market cap: $888.0 million; Price-to-sales ratio: 0.5; Dividend yield: 2.7%; TSINetwork Rating: Above Average; www.briggsandstratton.com) is the world’s largest maker of lawn mower engines.
The company also makes a wide variety of other home and garden equipment, such as portable power generators, pressure washers and snow blowers. About 30% of its revenue comes from overseas markets.
In its 2015 fiscal year, which ended June 30, 2015, Briggs’overall sales rose 1.9%, to $1.89 billion from $1.86 billion in fiscal 2014.
Sales of engines (61% of the total) declined 0.9% as unfavourable currency rates offset a 3% increase in shipments.
However, sales of other products (39%) rose 7.1%. That’s mainly due to the company’s $59.9-million acquisition of Allmand Brothers, a Nebraska firm that makes portable lighting products and heaters for industrial users, in August 2014.
The company also paid $28.3 million for Missouribased Billy Goat Industries in May 2015. This firm manufactures a range of lawn and garden equipment, including aerators, leaf blowers and vacuums.
Briggs is currently undergoing a restructuring that includes closing plants and phasing out less profitable products. If you set aside all unusual items, the company earned $64.8 million in fiscal 2015, up 66.0% from $39.0 million in 2014. Per-share earnings gained 73.1%, to $1.42 from $0.82, on fewer shares outstanding.
The company’s balance sheet is sound: its long-term debt of $225.0 million is a moderate 25% of its market cap. It also holds cash of $118.4 million.
Briggs has just increased its dividend by 8.0%. The new annual rate of $0.54 a share yields 2.7%.
The company will probably earn $1.30 a share in fiscal 2016, and the stock trades at 15.4 times that estimate. However, it faces increasingly strong competition from larger garden equipment makers like Deere and Toro. As well, its clients will concentrate on selling their existing inventories before ordering more engines.
Briggs & Stratton is a hold.
