If you own a lawnmower, chances are good that it was produced -at least partially – from this company. Briggs & Stratton (NYSE: BGG) is one of the top producers of small gasoline engines and outdoor power equipment, has positioned itself as a dominant player in this market for years.
However, the stock ended up taking a big hit, cementing what has been an excruciatingly long decline, after posting a surprise loss on their recent financial results. In addition to this, the announcement that the company would be closing one of its signature plants sent the stock down to a 44-year low.
Shares of the stock took a hit after the company reported an unexpected fiscal fourth-quarter loss, lowing it’s full-year guidance as well as cutting its quarterly dividend. Net sales for the quarter were down to $472 million, a $30 million decrease representing a 5.9 percent decline from the same time last year. Net sales were down slightly as well, from $1.88 billion last year to $1.84 billion.
This was attributed mainly due to unusually dry weather in Australia and Europe, which lowered storm generator sales. Full-year GAAP gross profit margin fell drastically, down from 21.2 percent to 16.4 percent.
At the same time, the company announced it would close its facility in Murray, Kentucky, laying off 630 employees. While in comparison to other major companies and their layoffs, 630 might not be a lot of people, it is a significant symbolic announcement if nothing else. Analysts are already calling this to be a “disastrous” quarter for the company.
“We are clearly disappointed with the fiscal 2019 results. The fourth quarter capped a difficult year of unprecedented market challenges and higher than expected operational inefficiencies encountered during the ramp-up of our business optimization initiatives,” said Todd J. Teske, Chairman, President and CEO in a press release. “The North America lawn and garden market slowed considerably as the quarter progressed from unusually wet, cool spring weather compounded by near-term market disruptions with channel partners. Europe set record high temperatures in June and July to impede channel inventory reductions. While we achieved operational improvements on many of the business optimization program start-up issues, continued inefficiencies offset the benefit of those improvements, including near-term labor availability challenges.”
Shares of Briggs ended up reaching a 44-year low before gaining back a few percentage points in after-hours trading. Over the past five years, the company has lost more than three-quarters of its market cap as its share price has declined from almost $30 to less than $5 per share at the time of writing.
While some analysts are still bullish on the stock, considering it undervalued at it’s current price point, it remains to be seen whether these losses will continue.
Briggs & Stratton Company Profile
Briggs & Stratton Corp is a producer of gasoline engines and outdoor power equipment. It operates in two segments including Engines segment and Products segment. Briggs & Stratton manufactures four-cycle aluminum alloy gasoline engines with gross horsepower ranging from 5.5hp up to 37hp and torques that range from 4.50 ft-lbs gross torque to 21.00 ft-lbs gross torque. The company’s engines are used primarily by the lawn and garden equipment industry. – Warrior Trading News
