Briggs & Stratton (BGG) versus Cummins (CMI) Financial Analysis

Cummins (NYSE: CMI) and Briggs & Stratton (NYSE:BGG) are both auto/tires/trucks companies, but which is the better investment? We will contrast the two businesses based on the strength of their risk, dividends, valuation, profitability, institutional ownership, earnings and analyst recommendations.

Institutional and Insider Ownership

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84.2% of Cummins shares are owned by institutional investors. Comparatively, 84.7% of Briggs & Stratton shares are owned by institutional investors. 0.6% of Cummins shares are owned by company insiders. Comparatively, 4.2% of Briggs & Stratton shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Dividends

Cummins pays an annual dividend of $4.32 per share and has a dividend yield of 2.7%. Briggs & Stratton pays an annual dividend of $0.56 per share and has a dividend yield of 2.7%. Cummins pays out 40.7% of its earnings in the form of a dividend. Briggs & Stratton pays out 42.7% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Cummins has raised its dividend for 8 consecutive years and Briggs & Stratton has raised its dividend for 6 consecutive years.

Profitability

This table compares Cummins and Briggs & Stratton’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Cummins 4.89% 22.18% 10.45%
Briggs & Stratton 1.31% 10.25% 3.61%

Valuation & Earnings

This table compares Cummins and Briggs & Stratton’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Cummins $20.43 billion 1.32 $999.00 million $10.62 15.29
Briggs & Stratton $1.79 billion 0.49 $56.65 million $1.31 15.59

Cummins has higher revenue and earnings than Briggs & Stratton. Cummins is trading at a lower price-to-earnings ratio than Briggs & Stratton, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

Cummins has a beta of 1.22, indicating that its stock price is 22% more volatile than the S&P 500. Comparatively, Briggs & Stratton has a beta of 0.67, indicating that its stock price is 33% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of current ratings and target prices for Cummins and Briggs & Stratton, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Cummins 1 14 6 0 2.24
Briggs & Stratton 0 3 0 0 2.00

Cummins currently has a consensus price target of $184.17, suggesting a potential upside of 13.41%. Briggs & Stratton has a consensus price target of $26.00, suggesting a potential upside of 27.33%. Given Briggs & Stratton’s higher possible upside, analysts clearly believe Briggs & Stratton is more favorable than Cummins.

Summary

Cummins beats Briggs & Stratton on 12 of the 17 factors compared between the two stocks.

Cummins Company Profile

Cummins Inc. designs, manufactures, distributes, and services diesel and natural gas engines, and engine-related component products worldwide. It operates through four segments: Engine, Distribution, Components, and Power Systems segments. The Engine segment manufactures and markets a range of diesel and natural gas powered engines under the Cummins and other customer brands for the heavy-and medium-duty truck, bus, recreational vehicle, light-duty automotive, construction, mining, marine, rail, oil and gas, defense, and agricultural markets. This segment also offers new parts and services, as well as remanufactured parts and engines. The Distribution segment distributes parts, engines, and power generation products; and provides service solutions, such as maintenance contracts, engineering services, and integrated products. The Components segment offers emission solutions, including custom engineering systems and integrated controls, oxidation catalysts, particulate filters, selective catalytic reduction systems, and engineered components; and turbochargers for light-duty, mid-range, heavy-duty, and high-horsepower diesel markets. This segment also provides air and fuel filters, fuel water separators, lube and hydraulic filters, coolants, fuel additives, and other filtration systems; and fuel systems for heavy-duty on-highway diesel engine applications, as well as remanufactures fuel systems. The Power Generation segment offers components that back-up and prime power generators, controls, paralleling systems, and transfer switches, as well as A/C generator/alternator products under the Stamford, AVK, and Markon brands. Cummins Inc. sells its products to original equipment manufacturers, dealers/distributors, and end users. The company was formerly known as Cummins Engine Company and changed its name to Cummins Inc. in 2001. Cummins Inc. was founded in 1919 and is headquartered in Columbus, Indiana.

Briggs & Stratton Company Profile

Briggs & Stratton Corporation designs, manufactures, markets, sells, and services gasoline engines for outdoor power equipment to the original equipment manufacturers in the United States. It operates in two segments, Engines and Products. The Engines segment offers four-cycle aluminum alloy gasoline engines that are used primarily by the lawn and garden equipment industry. Its products are used in various lawn and garden equipment applications, including walk-behind lawn mowers, riding lawn mowers, garden tillers, and snow throwers, as well as products for industrial, construction, agricultural, and other consumer applications that include portable and standby generators, pumps, and pressure washers. This segment also manufactures and sells replacement engines and service parts to sales and service distributors. The Products segment primarily provides a line of portable and standby generators, pressure washers, snow throwers, lawn and garden power equipment, turf care, and job site products. This segment sells its products through various channels of retail distribution, including consumer home centers, warehouse clubs, mass merchants, and independent dealers and distributors under its own brands, such as Briggs & Stratton, Simplicity, Snapper, Snapper Pro, Ferris, Allmand, Billy Goat, Murray, Branco, and Victa, as well as other brands comprising Craftsman and Troy-Bilt. The company also exports its products to customers in Europe, Asia, Australia, and Canada. Briggs & Stratton Corporation was founded in 1908 and is headquartered in Wauwatosa, Wisconsin.

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