Briggs & Stratton Risk/Reward Looking Unfavorable Heading Into Earnings

Baird provided its outlook on Briggs & Stratton Corporation BGG, stating the company's risk/reward looking unfavorable heading into earnings. Shares have outperformed the S&P by around 8 percent since the beginning of June, despite some negative peer comments on the lawn & garden space.

"Due to this divergence and the need for BGG to provide F2017 guidance, we view risk/reward into the print to be unfavorable," wrote Baird.

According to the analysts, Lawn & garden peers/customers downstream from Briggs & Stratton have generally noted challenging conditions in North America during calendar Q2, citing unfavorable weather. Consistently, Baird's dealer contacts indicate that calendar Q2 was worse than expected overall with inventory somewhat elevated. The company is also scheduled to issue F2017 guidance where consensus revenue (+3 percent) and incremental EBIT margin (40 percent) assumptions aren't easy hurdles, as noted by the analysts.

"We believe challenging end markets, inventory overhang, and pension expense are possible headwinds," they added.

Baird has a Neutral rating and $22 price target on shares.