Exceeding even the rosiest expectations of Wall Street analysts, Black & Decker Corp. yesterday reported a 43 percent increase in fourth-quarter profit, boosted by strong new-product sales and more efficient operations.
The Towson-based company's stock closed more than 5 percent higher on the news.
"They blew away everybody," said Clifford F. Ransom, director of special situation research for Raymond James & Associates Inc. in St. Petersburg, Fla. "They were a solid 10 percent above the highest estimate on the street."
Fourth-quarter earnings for the power tool and appliance manufacturer were $60.5 million, or 68 cents a share, compared with $42.3 million, or 47 cents a share, in the previous fourth quarter. Sales during the quarter jumped by 13.3 percent, to $1.4 billion, compared with $1.2 billion in 1993.
Thomas M. Schoewe, vice president and chief financial officer, said the higher sales were spurred by the demand for new products such as the company's Genesis line of faucets in its Price Pfister division, the expanding line of DeWalt power tools and Versapak, a battery system that provides interchangeable rechargeable batteries for various Black & Decker tools.
But Mr. Schoewe said the most outstanding performer was the company's SnakeLight, a flashlight at the end of a flexible tube that can be twisted into various shapes.
"There's isn't another product like it out there," Mr. Schoewe said, adding that more than half a million SnakeLights were sold in the last quarter. The product was introduced last summer.
Analysts attributed the better-than-expected results to the company's emphasis last year on boosting manufacturing efficiency and improving cash flow by keeping inventories low and managing receivable and payable accounts better.
"To me, the significant thing is that they've only started that process," Mr. Ransom said. "And I think that means that they will be making even more money than they did in 1994."
For the year, the company made a profit of $127.4 million, or $1.37 a share, compared with $66.0 million, or 65 cents per share, in 1993. The 1993 net income was depressed by a $29.2 million, or 35 cents a share, noncash charge for a change in accounting rules.
Sales last year were $4.4 billion, up from $4.1 billion.
Analysts were also impressed by Black & Decker's positive cash flow of $116 million during the year, which was used to pay off part of its $1.7 billion in long-term debt left over from its acquisition of Emhart Corp. in 1989.
In the past four years, the company had an average negative cash flow of $100 million a year.
"Finally, the company is going to be able to work off its debt load at a more rapid pace than we thought before," said R. Bentley Offutt, president of Offutt Securities Inc., a Hunt Valley-based institutional research and brokerage firm. Previously, the only way Black & Decker could reduce the debt was by selling subsidiaries, he said.
Mr. Schoewe said the large positive cash flow is expected to continue for the next several years. "We've indicated that the number in 1995 could be in the $75 million-to-$100 million range again," he said.
R. Scott Graham, analyst for Oppenheimer & Co. Inc., the New York-based stock brokerage firm, said he expects earnings to grow by 20 percent annually for the next two to three years. After that, "management will be able to run earnings growth at about 15 percent, year-in and year-out," he said.
Black & Decker's stock closed at $25 yesterday, up $1.25 per share.