What's good for the insurance companies is not always good for everyone else.
With a relatively mild hurricane season coming to an end, insurers have breathed a sigh of relief, free from paying out bank-busting claims to victims. Yet other sectors of the economy that saw sales rise in the wake of last year's major storms are experiencing troubled waters these days.
Take small engine manufacturer Briggs & Stratton (NYSE: BGG). It managed to turn a profit earlier this year from a storm surge in generator sales, as consumers anticipated worse hurricanes to come. But yesterday, it reported a net loss of $18 million, amounting to $0.36 a share, against a profit last year of $4.7 million or $0.09 a share, as no devastating hurricanes materialized.
The company hardly wishes wanton destruction on people, but in a business that can be made or broken on the ferocity of the hurricane season, the absence of a major storm making landfall in the U.S. this year meant that this clearly wasn't bound to be a banner quarter.
The lawn and garden segment also saw a falloff in demand, with lawnmower sales dropping 38%. Small engine sales were also down 34% from last year. It was a tough comparison to make, though, because those generator sales last year gave revenues an exceptional boost. The company also benefited from the inclusion of sales from its acquisition of bankrupt Murray, which continues to be a drain on performance.
Yet perhaps we should look to Briggs & Stratton and other engine makers like Toro (NYSE: TTC) and Tecumseh (Nasdaq: TECUA), as leading indicators for the housing market. As we have seen, the housing industry has been taking it on the chin recently, with falling median home prices and reduced sales. That seems to have trickled down to declining lawnmower and snow-thrower sales.
Briggs & Stratton's reports of slowing sales in these areas all year long may have indicated that there would be fewer homeowners to buy equipment. The company wasn't alone, either. Toro reported in August that its residential segment's quarterly earnings were off more than 13%, and Tecumseh's engine sales were down more than 9% for the quarter.
Things aren't looking any better for the near future. Briggs & Stratton says second-quarter profits will range between break-even and a loss of $5 million, though the second half of the year should pick up. The engine maker says retailers like Home Depot (NYSE: HD) and Lowe's (NYSE: LOW) now order products much closer to a given season, to better manage their own inventories. While that will slow production, increase operating costs, and reduce efficiency for Briggs & Stratton, it should make the company's third and fourth quarters look better.
Meanwhile, management will be casting its eyes toward the cloudy heavens, wondering whether the wild hurricanes will return next year.
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Fool contributor Rich Duprey does not own any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.
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