Black & Decker sales climb in first quarter

BUSINESS DIGEST

April 28, 2006|By ALLISON CONNOLLY | ALLISON CONNOLLY,SUN REPORTER

Black & Decker Corp. posted slightly higher sales for the first quarter and beat Wall Street forecasts despite reporting net income below last year's quarter, when an insurance settlement boosted profit.

The Towson-based power tools manufacturer reported net income of $113.1 million, or $1.45 a share, down 22 percent from $144.8 million, or $1.74 per diluted share, in the first quarter last year.

Excluding last year's $55 million insurance settlement, net income would have increased 11 percent. Sales were $1.5 billion, a 1 percent increase over a year earlier.

The company's earnings of $1.45 a share beat estimates of a consensus of analysts polled by Thomson Financial by 6 cents a share.

With new products on the way, including DeWalt's 36-volt line of lithium-ion tools, which should hit store shelves during the second quarter, the company boosted guidance for 2006. Officials expect annual earnings per share of between $7.30 and $7.45, and sales growth in the range of 8 percent to 11 percent, excluding nonrecurring items from last year. For the second quarter, the company forecast earnings of $1.95 to $2 per diluted share, or growth of between 6 percent and 9 percent over last year, excluding nonrecurring items.

However, officials expect the cost of raw materials will continue to rise and the company increased its estimate for commodity inflation for the year from $50 million to $65 million.

In a conference call with analysts yesterday, Chief Financial Officer Michael D. Mangan noted that sales and net income increased in all three business segments - power tools and accessories, hardware and home improvement, and fastening and assembly systems.

The company will grow through new products and acquisitions, Mangan said, particularly "bolt-on" acquisitions that fit in with the company's existing business segments and use the same distribution channels. The March 1 purchase of Vector Products Inc., a Fort Lauderdale, Fla.-based maker of portable consumer power products, contributed 1 percent to first-quarter sales. "We continue to have a pipeline of transactions that we're looking at," Mangan said.

Some analysts said yesterday they were pleasantly surprised to see that the company increased sales over the first quarter of 2005, which saw a 39 percent rise in sales. "I think they did well and I think they will do even better for the year," with the introduction of new products, said R. Bentley Offutt of Cockeysville-based Offutt Securities Inc. Offutt does not own any shares in the company.

The company managed to improve sales on existing products, which is hard to do in a competitive market, said Bob Goldsborough, vice president of research at Chicago-based Ariel Capital Management, which was Black & Decker's third-largest shareholder as of Dec. 31 with 3.9 million shares. "Everyone on Wall Street thought they could never grow power tools, and they grew it by 2 percent," Goldsborough said. "That's impressive."

Black & Decker stock rose 97 cents yesterday to $92.98 a share.

allison connolly@baltsun.com

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