Briggs & Stratton Announces Dividend Hike & Share Repurchase
A day before releasing its fourth quarter and fiscal 2014 results, Briggs & Stratton Corp. (BGG) delivered on its commitment to enhance returns for its shareholders by announcing a 4% dividend hike and a $50 million share repurchase program. Shares of Briggs & Stratton however dipped 1.40% a day ahead of the results as the company’s guidance for the fourth quarter remains below expectations.
Briggs & Stratton’s board of directors have approved a 4% increase in its quarterly cash dividend to 12.5 cents per common share from the prior quarterly dividend of 12 cents per share. The increased dividend will be paid on Oct 1, 2014 to shareholders of record at the close of business on Sep 17, 2014.
The dividend increase comes after a gap of 2 years. Briggs & Stratton had last declared a 9% increase to the current payout of 12 cents per share on Aug 8, 2012. This move will take the dividend yield from the current 2.52% to 2.63%. Briggs & Stratton has outscored its peers like Lindsay Corporation (LNN), AGCO Corporation (AGCO) and Alamo Group, Inc. (ALG) with respective dividend yield of 1.34%, 0.89% and 0.57%. The quarterly dividend payout will cost the company approximately $5.84 million,
Briggs & Stratton’s board of directors also authorized an additional $50 million share repurchase program that will be in force till Jun 30, 2016. Depending on market conditions, the company will repurchase shares using available cash, on the open market or in private transactions from time to time.
On Jul 10, 2014, Briggs & Stratton provided with a sneak peak at its fourth-quarter fiscal 2014 (ended Jun 29, 2014) sales ahead of its results. The company also announced plans to adjust its Snapper residential product offerings and consolidate manufacturing facilities to cut down costs.
The producer of gasoline engines for outdoor power equipment expects net sales to grow 4% year over year to $495 million in the fourth quarter, while for fiscal 2014 sales are expected to remain flat at $1.86 billion compared with the prior fiscal. The Zacks Consensus Estimate for sales in the fourth quarter is at $495 million and for fiscal 2014 it is currently at $1.86 billion, both in line with management’s expectations. The Zacks Consensus Estimate for earnings is at 35 cents, reflecting a 57% year-over-year growth for the fourth quarter of fiscal 2014 while for fiscal 2014 it is at 85 cents, projecting a 8.6% year-over-year decline.
In order to improve the operating performance of its Products business, Briggs & Stratton is planning to simplify its Snapper product line and reduce offerings of certain low volume and lower-priced Snapper lawn and garden products, beginning in the 2016 lawn & garden season. The company will instead focus on the premium residential products through its Snapper and Simplicity brands and commercial products through its Snapper Pro and Ferris brands that generate higher margins and returns.
Briggs & Stratton will also consolidate manufacturing facilities to reduce the related manufacturing capacity and expenses. Total restructuring charges from these actions is expected at approximately $30 to $37 million. Briggs & Stratton projects annual savings of approximately $15 to $20 million from these actions, starting from fiscal 2015.
Milwaukee, WI-based Briggs & Stratton is the world's largest producer of gasoline engines for outdoor power equipment. Its wholly owned subsidiary, Briggs & Stratton Power Products Group LLC, is North America's top manufacturer of portable generators and pressure washers. This subsidiary is a leader in designing, manufacturing and marketing of standby generators and lawn, garden and turf care products through its popular brands.
Currently, Briggs & Stratton has a Zacks Rank #5 (Strong Sell).
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