B&D stock falls 7.2% on disputed downgrading

Basis of report incorrect, company says

Hardware industry

May 25, 2000|By Shanon D. Murray | Shanon D. Murray,SUN STAFF

Black & Decker Corp.'s stock price fell 7.2 percent yesterday, after a Salomon Smith Barney analyst downgraded his rating on the company to "neutral" based on information the Towson-based toolmaker said is incorrect.

Stephen Kim, an analyst at Smith Barney in New York, said in a research report that he is downgrading his "outperform" rating on Black & Decker's stock "due to the potential for a heightened competitive environment ... over the next year."

The report said industry sources have indicated that retailers Home Depot Inc. and Lowe's Cos. Inc. have each asked Stanley Works, a Connecticut-based hand tools manufacturer, to develop a line of power tools, as well as participate in the lock sets category.

On that news, Black and Decker's stock closed yesterday at $37, down $2.875.

At one point, the stock was down 9.1 percent, having lost the bounce it got last month when it reported first-quarter earnings that beat analysts' estimates.

"The information on which Mr. Kim based his decision to downgrade the stock is inaccurate," said Barbara Lucas, a Black & Decker spokeswoman. "Mr. Kim is now aware it is inaccurate, and we expect him to issue a clarification. I hope it will be very shortly."

Lucas said Black & Decker confirmed that the retailers have not encouraged Stanley to enter the power tools market.

Kim did not return phone calls to his office yesterday.

R. Bentley Offutt, president of Offutt Securities Inc. in Hunt Valley, said the majority of analysts have been positive on Black & Decker's stock.

Offutt has a "neutral" rating on the stock, but because the company's first quarter results exceeded expectations, he plans to upgrade it to "attractive," he said yesterday.

Black & Decker's profit for the three months ended April 2, excluding a one-time gain from the sale of a $25 million note, was $47.1 million, or 54 cents a share. Net income in the first quarter last year was $39.2 million, or 44 cents a share.

The company holds the dominant position in the $3.7 billion North American power tools market with an estimated 40 percent market share.

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