Black & Decker lifts earnings 5 percent New products pace strong 3rd period

October 16, 1997|By Sean Somerville | Sean Somerville,SUN STAFF

Boosted by sales of new products, Black & Decker Corp. posted a 5 percent increase in third-quarter profits, a gain limited by the strength of the dollar against European currency, the Towson-based company said yesterday.

For the quarter that ended Sept. 28, Black & Decker reported net earnings of $58.4 million, up from $55.7 million in the year-ago period. Earnings per share increased 3 percent, from 58 cents to 60 cents, on sales of $1.22 billion, a 3 percent increase from $1.19 billion.

The performance met the expectations of analysts. "This was the first positive comparison in three quarters," NatWest Securities analyst Jim Lucas said. "It was a good quarter."

Black & Decker shares fell 6.25 cents, closing at $37.938.

The company has struggled in recent quarters, with the decline of sales of its hit SnakeLight flexible flashlight. But yesterday, Black & Decker said its new products are picking up some of the slack.

"We are encouraged by the level of sales growth in the quarter, despite a very difficult foreign-exchange environment," said Nolan D. Archibald, the company's chairman and chief executive. "This improvement reflected continued success of our new products, which was offset to some extent by softer-than-expected sales growth in Asia and Latin America, as well as the elimination of low-margin products in several four businesses."

Doing particularly well is a new line of DeWalt professional machinery tools, the Woodhawk circular saw and the Wizard rotary tool. Black & Decker has cut back on some coffee makers and irons.

Without the damage of foreign currency translation, quarterly sales would have been up 7 percent instead of only 3 percent, the company said. In Germany, for instance, the dollar is 13 percent higher against the German mark than last year, which cost Black & Decker about $20 million in third-quarter sales.

Nicholas P. Heymann, a Prudential Securities analyst who has a "hold" rating on Black & Decker, said the company said it might have trouble meeting fourth-quarter expectations. "They're working very hard, very diligently to try to deal with a lot of hairline fractures," he said.

In addition to the foreign currency problems, Black & Decker faces falling sales in Australia, manufacturing problems in Brazil and pricing competition on some of its professional power tools, Heymann said.

But Lucas, who grades Black & Decker as a "buy," said sales in Germany and the United Kingdom are showing signs of life, cost-cutting continues and new products appear strong. He also Black & Decker shares are trading at 14 times projected 1998 earnings, a discount to the market and the industry.

Pub Date: 10/16/97

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