Black & Decker net up 30%

Tools business turns forecasts into sawdust

Earnings

July 22, 1999|By William Patalon III | William Patalon III,SUN STAFF

Black & Decker Corp. reported yesterday that its second-quarter profit jumped 30 percent -- handily beating Wall Street estimates -- thanks to an electrifying performance in its core power tools business.

The Towson-based maker of tools and hardware said it earned a record $70.7 million in the quarter that ended July 4, compared with the $54.2 million it earned in the second quarter last year.

Because of a stock buyback that reduced the number of shares outstanding, profit per share jumped 40 percent to 80 cents, exceeding the consensus estimate of 77 cents and the top estimate of 79 cents, according to Zacks Investment Research.

"They're coming at the ball covering every point on the field," said Prudential Securities Inc. analyst Nicholas Heymann, Wall Street's biggest bull on Black & Decker, who this week reaffirmed his "strong buy" rating on the stock.

After rising as much as $1.75 a share to touch $63.75 earlier in the session yesterday, the stock closed 37.5 cents lower at $61.625, which is $3 below its 52-week high, $64.625, reached Tuesday.

Heymann theorized that investors were spooked partly by a climb in inventory, which he said results from the company's gearing up to launch a DeWalt-brand line of 24-volt cordless tool products.

That line will outclass anything else on the market, including some plug-in-the-wall power tools, Heymann said, because the new rechargeable tools will finally generate the torque needed to do heavy jobs. The lack of such power has been the main criticism of battery-powered tools.

Heymann said the company views overhead costs -- such as selling and advertising expenditures -- as investments rather than entitlements, a problem at many big public companies. As a result, overhead costs rise only if sales do, he said.

Second-quarter operating profit for Black & Decker's power tool business rose 30 percent on a 7 percent increase in revenue, the company said.

Overall sales for the quarter fell to $1.08 billion this year from $1.17 billion in last year's second quarter, largely because of divested businesses and fluctuations in currency exchange rates, the company said.

"Black & Decker is having a very solid year," said Nolan D. Archibald, the company's chairman and chief executive officer.

Heymann predicted that Black & Decker shares will rise to $88 next year and to $125 in 2001 if the economy remains sound.

Pub Date: 7/22/99

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