Bear of the Day: Briggs & Stratton (BGG)
Briggs & Stratton (BGG) was written up as the Bear of the Day back on May 16. At that time, the company was coming off a $0.06 miss of the Zacks Consensus Estimate, but since then there has been a new development. BGG is still a Zacks Rank #5 (Strong Sell) and it is the Bear of the Day.
Triming Expectations
On Thursday, July 10, the company issued guidance that was below Wall Street expectations. The consensus revenue estimate was $511M, but management said that $495 is more likely.
As a result of the lower revenue guidance, estimates have moved a little lower, and that should keep this stock a Zacks Rank #5 (Strong Sell) for at least a few more weeks.
Narrowing down the Snapper
The company noted that beginning in the 2016 lawn & garden season, it will narrow its assortment of lower-priced Snapper consumer lawn and garden equipment and consolidate its products manufacturing facilities in order to further reduce costs.
The Company will close its McDonough, Georgia location and will take restructuring charges of $30M - $37M including non-cash write-downs of ~$15M to $20M.
Valuation
Despite the Zacks Rank #5 (Strong Sell), the valuation on this stock is rather attractive. The stock trades mostly in line with the industry average, but just a hair below most metrics. The forward earnings multiple of 15x is just below the 17x industry average. The price to book of 1.4x is also below the 2x industry average. The price to sales multiple of 0.5x is well below the 1x industry average. All in all, the valuation looks good, but one has to keep in mind how the earnings estimate have continued to fall.
The Chart
The price and consensus chart is a very useful tool for investors. Developed here at Zacks, we show how earnings estimates have moved in relation to the stock price. The recent move lower in estimates tells investors that it might be a good time to either sell their position or wait for a turn higher in estimates before buying the stock. Over the last several years, BGG has struggled to improve the earnings picture, so investors would be wise to wait until estimates turn around.
Follow Brian Bolan on twitter at @BBolan1
Brian Bolan is a Stock Strategist for Zacks.com. He is the Editor in charge of the Zacks Home Run Investor service, a Buy and Hold service where he recommends the stocks in the portfolio.
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