Briggs & Stratton Corporation (BGG - Free Report) reported fourth-quarter fiscal 2017 (ended Jul 2, 2017) adjusted earnings of 46 cents per share, flat with the prior-year quarter. Results missed the Zacks Consensus Estimate of 52 cents per share.
On a reported basis, Briggs & Stratton posted earnings per share of 46 cents for the quarter, up significantly from 12 cents per share recorded in the prior-year quarter. The year-earlier quarter included one-time adjustments, while reported quarter did not have any such adjustments.
Briggs & Stratton reported revenues of $474 million in the fiscal fourth quarter, a decline of 5.6% year over year, mainly due to dismal residential sales. Revenues also fell short of the Zacks Consensus Estimate of $542 million.
Cost of sales went down 8% year over year to $373 million. Adjusted gross profit decreased 6% to $101 million from $107.6 million in the prior-year quarter. Adjusted gross margin contracted 10 basis points (bps) year over year to 21.3%.
Adjusted engineering, selling, general and administrative expenses dropped 3% year over year to $74.2 million. Adjusted operating income in the reported quarter was $30 million compared with $10.9 million in the year-ago quarter.
Engines Segment: Net sales in this segment descended 7% year over year to $292.5 million. Adjusted segment income for the quarter decreased 6% to $27 million from $28.7 million recorded in the year-ago quarter.
Product Segment: The segment reported sales of $203.4 million, down 6% from the year-earlier quarter. The segment reported adjusted income of $3.4 million, versus $2.8 million in the year-ago quarter.
Fiscal 2017 Performance
Briggs & Stratton posted earnings of $1.31 per share for fiscal 2017, up 4.8% from adjusted earnings of $1.25 a share in fiscal 2015. Earnings missed the Zacks Consensus Estimate of $1.38 per share. Including special items, earnings came in at $1.31 per share for the fiscal, compared with 60 cents a year ago. Prior-year figures included one-time adjustments, while the reported year did not have any such adjustments.
Revenues for the full year edged down 1.3% year over year to $1.79 billion from $1.81 billion in fiscal 2016 and fell short of the Zacks Consensus Estimate of $1.85 billion.
Briggs & Stratton had cash and cash equivalents of $61.7 million at the end of fiscal 2017 compared with $89.8 million as of fiscal 2016 end. The company generated cash flow from operations of $90.3 million in fiscal 2017 compared with $114.9 million in fiscal 2016.
During fiscal 2017, Briggs & Stratton repurchased around $19.7 million in shares under the share repurchase program and paid $24.1 million in dividends. As of Jul 2, 2017, the company had remaining authorization to repurchase up to approximately $30.5 million shares, with an expiration date of Jun 29, 2018.
Fiscal 2018 Outlook
For fiscal 2018, Briggs & Stratton expects net sales to be in the range of $1.87-$1.92 billion, with an annual growth of 4.5-7.5%. Projections reflect modest market growth assumptions plus a return to more normalized channel inventories. The company provided earnings per share outlook of $1.31-$1.48 for the fiscal 2018.
Briggs & Stratton will also gain from the launch of its business optimization program to drive efficiencies, and expand capacity in commercial engines and cutting equipment. The program entails expanding production of Vanguard commercial engines into the company's existing large engine plants, located in Georgia and Alabama. It also includes the expansion of Ferris commercial mower production capacity in a new, modern facility, which is located close to the current manufacturing location in New York.
Production of Vanguard engines in the company's U.S. plants is expected to be phased in beginning in late fiscal 2018 through the middle of fiscal 2019. Production of Ferris commercial mowers is likely to begin in the new facility in the latter half of fiscal 2018 and the exit from the existing plant and remote warehouse is planned for fiscal 2019.
The business optimization program also comprises the project costs for the integration and go-live efforts associated with Briggs & Stratton's ERP upgrade and the anticipated operational excellence efficiency improvements. The go-live for the ERP upgrade is expected toward the end of fiscal 2018, subsequent to the peak seasonal shipment period.
The business optimization program will generate annual pre-tax savings of $30-$35 million. The company estimates that the savings will be achieved over a three-year period, beginning fiscal 2019. Total pre-tax expenses related to the business optimization program are expected to be approximately $50-$55 million, of which $24-$28 million is anticipated be recognized in fiscal 2018.
Share Price Performance
In the last one year, Briggs & Stratton has significantly underperformed the industry with respect to price performance. The stock gained around 9.75%, while the industry rose 56.51%.
Zacks Rank & Key Picks
Briggs & Stratton currently carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the same sector are AGCO Corporation (AGCO - Free Report) , Altra Industrial Motion Corp. (AIMC - Free Report) and Apogee Enterprises, Inc. (APOG - Free Report) . All three stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
AGCO has expected long-term growth rate of 13.51%.
Altra Industrial Motion has expected long-term growth rate of 8.00%.
Apogee has expected long-term growth rate of 12.50%.
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