Profit soars at Black & Decker

Rise of nearly 72% reflects acquisitions

April 29, 2005|By Paul Adams | Paul Adams,SUN STAFF

Black & Decker Corp. reported a nearly 72 percent increase in first-quarter income yesterday as the impact of recent acquisitions and strong demand for tools in the construction industry propelled sales for the Towson tool manufacturer.

Net income in the quarter that ended April 3 was $148.7 million, or $1.80 per share, compared with $86.6 million, or $1.09 per share, in the fiscal first quarter of 2004.

Sales of DeWalt power tools to builders and other buyers climbed 30 percent, making up the biggest share of a 50 percent increase in sales for the power tool division.

The addition of Pentair Inc.'s tool line, which Black & Decker purchased in October, also fueled sales growth. Acquisitions added 22 percent to companywide revenue in the quarter, the company said.

Sales across all divisions climbed to a record $1.52 billion, up 39 percent from $1.09 billion in the first quarter last year.

"I thought it was a very strong quarter with impressive performance across the board," said Bob Goldsborough, a research analyst for Ariel Capital Management in Chicago. Ariel owns 3.8 million shares and is the third-biggest Black & Decker shareholder.

"Black & Decker continues to work really well with retailers to get as much DeWalt on the shelves as possible," he said.

Fears of a cyclical slowdown in housing construction and home improvement spending might be holding the company's stock down, analysts said.

Many economists expect the pace of construction to retreat from recent highs once the effect of higher interest rates sets in. The company has said in the past that about 20 percent of its business depends on housing, Goldsborough said.

Despite the improved quarterly results, Black & Decker's shares are down 5.6 percent from their close of $88.33 at the end of last year. The shares gained 45 cents in trading yesterday to close at $83.34.

"There's no question that some measure of sentiment from the investment community is impacted by housing," Goldsborough said.

The latest earnings were affected by a $55 million pretax insurance settlement that contributed 43 cents to earnings per share. Excluding the one-time gain, earnings per share $1.36 were 46 percent higher than in the year-earlier period.

A 25 percent increase in sales of Price Pfister plumbing products led to a 9 percent increase in the company's hardware and home improvement segment, the company said.

"Sales growth in our existing businesses has averaged 10 percent during the last four quarters, and all of our segments grew solidly again this quarter," said Nolan D. Archibald, Black & Decker's chairman and chief executive.

Black & Decker raised its earnings forecast for the second quarter to $1.73 to $1.78 per share from $1.67. Excluding the insurance settlement gain, the company expects to earn $6.55 to $6.70 from continuing operations for the full year. Previously, the company had forecast earnings of $5.95 to $6.10 for the year.

The average estimate of analysts polled by Thomson Financial put expected earnings at $1.34 for the first quarter, not including unusual items.

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