What happened 

Shares of small-engine and generator manufacturer Briggs & Stratton Corporation (OTC:BGGS.Q) jumped 11.3% in April, according to data provided by S&P Global Market Intelligence, after the company reported better-than-expected earnings. Shares continue to hold those gains through the first few days of May. 

So what 

Fiscal third-quarter revenue fell slightly to $597 million as original equipment manufacturers delayed purchases and tried to shorten their production cycles. But management anticipated that change and was able to grow adjusted net income from $34.9 million to $35.8 million, or $0.83 per share. Results were slightly ahead of expected earnings of $0.81 per share, which can often cause a bounce in a stock. 

Small generator at a construction site.

Image source: Getty Images.

What may have helped shares even more than third-quarter results was management projecting full-year revenue of $1.86 billion to $1.9 billion and earnings of $1.31 to $1.46 per share. That implies that analyst estimates of $1.37 per share in earnings might be a little low. 

Now what 

Briggs & Stratton has worked to move the business to higher-margin products in commercial markets, which is driving earnings higher despite the drop in revenue. And as that continues, we should see strong net income numbers even without growth. In the fourth quarter, investors should watch for timing of sales into retail channels, something management cautions could be slower than anticipated. But with the stock trading at 17 times the high end of earnings estimates, if net margins continue to rise like this, shares still have room to run higher.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.