Small-engine manufacturer Briggs & Stratton
Profits were turned to mulch as well at $60 million, or $1.16 a share. That was well below the $1.29 analysts had expected the outdoor-equipment manufacturer to generate, but it was also 9% below the company's own expectations. Last year, Briggs & Stratton had earned $80 million, but that included a nearly $20 million gain from the purchase of bankrupt lawn mower maker Murray, which had stiffed Briggs for $40 million. Through the bankruptcy courts, it was able to acquire almost all of the defunct company's assets and inventory for $125 million.
Sales of Murray products accounted for a drop of $44.4 million in net sales, which led to an 11% decline overall in power equipment. Engines were also off by about 1% from the year-ago period, while generators were the one bright spot. Thanks to higher demand in anticipation of the devastating hurricanes that hit last year, generator sales grew 21% year over year.
Even so, that means profits were flat from year to year, and the company isn't forecasting anything better for the rest of the year either. With retailers like Home Depot
As a result, Briggs & Stratton lowered its full-year earnings forecast to $132 million to $135 million, or $2.56 to $2.62 per share, down from previous estimates of as much as $2.87 per stub.
Part of the company's problem is higher raw-materials costs, everything from oil to copper and aluminum, which put a leak on margins; net margins were down by 200 basis points for the quarter. It's tried to impose across-the-board price increases for its products, and while some of the gains it realized reflect those increases, the overall drop in sales hurt too much.
At least one hedge fund manager thinks Briggs & Stratton ought to consider putting itself up on the auction block. A larger rival like Ingersoll-Rand
These are not short-term solutions, and that should hearten investors to a certain extent. But investors also shouldn't expect to see this engine maker snorting to life any time soon.
Mow down some value with these related Foolish articles: