Briggs & Stratton: An American legend
Today's Financial News - Posted August 13, 2009
Briggs & Stratton (NYSE:BGG) is an American icon. But even a long history of success has not spared many companies from the pain of a nasty recession. Did the legendary engine builder live up to its name?
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): I could not tell you if I am a “man’s man” or not. Frankly, I don’t care.
What I do know is I have a sweet garage that would make Tim “the Tool Man” Taylor jealous, a room filled with nothing but duck decoys, outboard motors and tree stands. And I own the only truck in the company parking lot.
Since I have never seen Old Yeller, I can’t tell you if I would have cried… the ultimate man’s lithmus test.
With my propensity for anything made of iron, wood or fiberglass, it is no wonder I dug through Briggs & Stratton’s (NYSE:BGG) latest quarterly earnings report like a mechanic searching for the errant tap in a hot-rodded small-block Chevy.
With its hugely popular line-up of small motors, the company is an American Icon. Just about every garage in the nation, sports one or more of the ubiquitous engines.
At the moment, I’ve got three.
But how did the legendary outdoor power equipment maker fare during one of the nastiest recessions in its 100-year history?
Well, there’s good news and bad news.
Isn’t there always?
The good news is the company’s top-notch management team knew exactly how to deal with the bad news, a quickly plummeting top line, down 17% during the company’s fiscal fourth quarter.
But thanks to some production cuts, an improved tax rate and a significant drop in input prices, the company’s bottom line surged by over 1,000%, from $479,000 to $5.3 million.
Before you go calling your broker to get in on this hot stock, realize the surge is largely due to the way we account for one-time moves, like shutting factories and employee benefit costs.
For a more accurate look at the company’s health, we need to expand our field of view to an entire year. With fiscal ’09 wrapped up, we can do just that.
Briggs & Stratton was able to record annual earnings of $31.9 million, up 41% from 2008’s income figure of $22.6 million. It’s not a thousand percent gain, but is certainly notable.
But even more noteworthy is the company managed to significantly increase its profits even while revenues were dropping. During the year, the company sold $2.09 billion worth of its products, 2.7% less than the previous fiscal year’s revenue of $2.15.
The means management’s attempts to boost margins and squeeze every bit of efficiency out of the production process paid off. The question now is whether they cut too much.
As the company enters a new fiscal year, global demand for its products will be on the rise once again. If Briggs & Stratton cannot keep up with its order book, its competitors will.
Overall, I concur with the market activity today and have a bullish outlook for Briggs & Stratton.
The company will keep on motorin’ well into the future, taking its shareholders with it.
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