UPDATE: Black & Decker 3Q EPS Boosted By Early Shipments
October 12 2009 - 10:57AM
Dow Jones News
Black & Decker Corp. (BDK) said third-quarter earnings will
be roughly twice its earlier forecast, helped by
earlier-than-expected shipments of industrial power tools to
retailers and better-than-expected margins.
An unexpectedly low tax rate and favorable trends in foreign
currency translation were also factors as the tool maker raised its
profit outlook to 91 cents a share from a July view of 35 to 45
cents a share.
Shares jumped 6.4% to $50.28. Barclays Capital on Monday also
initiated coverage of the stock with an overweight rating and a $55
price target.
Black & Decker said sales are expected to have fallen 23% -
analysts surveyed by Thomson Reuters most recently, on average,
expected a 25% drop to $1.2 billion and earnings of 43 cents a
share.
Chairman and Chief Executive Nolan Archibald said the modestly
better revenue was largely due to shipping promotional items in its
U.S. industrial power-tools and accessories business in the third
quarter, not the fourth as had been planned.
The bulk of that group's sales are tied to the company's Dewalt
brand of power tools, sold at Home Depot Inc. (HD), Lowe's Cos.
(LOW) and other home-improvement retailers. Black & Decker's
U.S. sales of industrial power tools and accessories have been
especially weak in recent quarters, falling 30% from year-earlier
levels in each of the two most recent quarters amid weak
construction activity and retailers' efforts to lower
inventories.
Black & Decker spokesman Roger A. Young on Monday declined
to say which customers are readying for promotions or whether they
are tied to the holidays, but he confirmed the sales increase isn't
tied to any larger pickup in demand from the construction industry
or other end markets.
"We specifically intended to indicate it was the timing" of
shipments, he said. "But the margin impact is real, and that
certainly is better than we expected."
Black & Decker has slashed its dividend and has taken other
cost-cutting steps in an attempt to mitigate the impact of
deteriorating markets, especially in Europe and the auto industry
in general. Margins were aided in the latest quarter by that
cost-cutting, said Archibald.
Tax adjustments in any given quarter can cause wide variance in
its tax rates, the company added.
The Towson, Md., company boosted its 2009 earnings target in
July to a range of $1.65 to $2 after second-quarter earnings topped
expectations. On Monday, Black & Decker said it would update
full-year guidance on Oct. 22 when it reports full results.
Analysts, on average, expect $1.63 a share in 2009 earnings on
$4.66 billion in revenue.
Stifel Nicolaus analyst David Schick, who tracks
home-improvement retailers, took Black & Decker's announcement
as a positive sign for Lowe's and Home Depot as he also noted the
federal government's appliance-rebate program is expected to take
effect later this year or early next year.
"We note it is unlikely that appliances and power tools business
gets better in a vacuum," he wrote in a note to clients reiterating
buy ratings on Lowe's and Home Depot.
Home Depot shares recently traded up 1.4% at $27.34, while
Lowe's shares were 1.6% higher at $21.28.
-By Mary Ellen Lloyd, Dow Jones Newswires; 704-948-9145;
maryellen.lloyd@dowjones.com
(Kevin Kingsbury contributed to this story.)