Black & Decker shares leap 9% Company will report stronger earnings than expected

Power tools selling well

Fourth quarter shaping up as strongest ever

January 08, 1998|By Sean Somerville | Sean Somerville,SUN STAFF

Black & Decker Corp. shares jumped more than 9 percent yesterday after the company said earnings in its pivotal fourth quarter would be stronger than expected.

The Towson-based company said strong power tool sales in the U.S. offset a weak retail climate in Brazil, economic turmoil in Asia and foreign currency fluctuations in Europe.

"Although final, audited numbers are not yet available, it looks as though our operating results for the fourth quarter were the strongest in Black & Decker's history," said Nolan D. Archibald, chairman and chief executive officer.

Black & Decker shares rose $3.5625 to close at $41.875, on volume nearly 3 1/2 times the daily average.

The company said it expects earnings per share to be about 10 percent higher than the year-ago number of 91 cents -- higher than the consensus estimate of about 93 cents a share.

Analysts said they expect Black & Decker to turn its attention to its household products division, which is struggling to make up ground lost by the decline of the SnakeLight flexible flashlight.

Nicholas P. Heymann, an analyst for Prudential Securities Corp., predicted Black & Decker announcements soon that will "focus on restructuring or re-evaluation of its participation in housewares." Household products account for about 16 percent Black & Decker's annual sales of $4.9 billion.

Heymann also predicted that the company would reconsider expansion plans in Asia to account for the region's poor economies.

But Barbara Lucas, senior vice president of public affairs for Black & Decker, said, "The only announcement we have planned has to do with year-end results."

Reaching the $1 mark for the quarter would put Black & Decker's annual earnings at about $2.34 a share. The fourth quarter typically accounts for more than 40 percent of annual sales.

The announcement comes a little more than a year after company shares plunged 16 percent in one day, after Black & Decker warned that earnings would fall short of expectations. That history is part of the reason the company made the announcement, Lucas said. "You don't want to surprise people in either direction."

The stock price increase was welcome news for the company, which has spent months answering questions about Sunbeam Corp. Chairman Albert Dunlap's possible interest in acquiring Black & Decker.

Dunlap, who earned the nickname "Chainsaw Al" by making deep cuts at other companies, cut half of Sunbeam's 12,000 jobs in November and unloaded 87 percent of a 5,000-item product lineup to focus on the Sunbeam and Oster lines.

Dunlap hired Morgan Stanley & Co. in October to look into the possibility of selling Sunbeam, or having Sunbeam buy another company. He has since said his interest lies in companies with strong brand names that have been poorly managed. Dunlap said Black & Decker, Maytag Corp. and Whirlpool Corp. fit those criteria. Black & Decker, which said its announcement had nothing to do with Sunbeam, singled out the Wizard rotary tool and the Wood Hawk circular saw -- both new products -- as strong performers. The company also said demand was strong for DeWalt professional power tools, including a new machinery line and 18-volt reciprocating saw.

Analysts had lowered their earnings estimates in the fall, after Black & Decker hinted at difficult challenges.

"It's good news that Black & Decker was able to do this for earnings," Heymann said. "It came a little earlier than we expected."

Pub Date: 1/08/98

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