Earnings rise 17% at Black & Decker

Tools, appliances maker surprises analysts yet again


July 25, 2000|By Paul Adams | Paul Adams,SUN STAFF

America's passion for power tools and relative strength in the home improvement business helped push Towson-based Black & Decker Corp. profit up 17 percent in the second quarter, beating analysts' estimates for the second time in as many quarters.

For the three-month period that ended July 2, the company reported net income of $83 million, or 97 cents per share, up from $70.7 million, or 80 cents per share, for the corresponding period in 1999. Second-quarter sales were up about 4 percent to $1.13 billion.

Earnings per share were 3 cents above the 94-cent average estimate of analysts polled by First Call/Thomson Financial. The company is expecting to meet or exceed its earnings per share growth target of 15 percent for the year.

"It's a good, solid quarter," said Barry Bannister, an equity analyst with Legg Mason Wood Walker. Wall Street has some concerns about softening demand for Black & Decker's more cyclical tool products. But overall, he said, "It's an obscenely cheap stock."

For the first six months, earnings were $143.2 million, or $1.66 per share, compared with $109.9 million, or $1.24 per share, in 1999.

Sales of power tools - particularly in North America - led the way, with sales up 8 percent and profit up 22 percent for the second quarter. Demand for lawn and garden equipment and the global launch of the company's Dustbuster cordless vacuum helped boost consumer tool sales, as well. But sales of consumer products lagged somewhat in Europe, slightly offsetting a rise in overseas sales of professional power tools.

The company also completed the purchase of Momentum Laser Inc., a Santa Clara, Calif., supplier of construction lasers. Terms were not disclosed.

The company is expecting to beat last year's sales by 4 percent to 7 percent. Investors apparently were not impressed with the report, sending the stock down 56.25 cents to close at $38.3125.

The stock's decline does not surprise analysts, who say investors are not rewarding Black & Decker for several quarters of solid performance. Its fortunes often rise and fall with interest rates and housing starts, even though construction-related business accounts for a fraction of its diversified portfolio. A series of interest rate increases by the Federal Reserve has tempered enthusiasm for stocks linked to the construction trades.

"This is a company that, for whatever reason, doesn't always get the respect it deserves from Wall Street," said James Lucas, an analyst with Janney Montgomery Scott. Lucas gives the company a "buy" rating.

Black & Decker also announced yesterday that it has increased its share buyback by 2 million shares for a total of up to 3.2 million shares. The company repurchased 1.65 million shares of its common stock during the second quarter.

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