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Black & Decker earnings meet forecasts; Shares fall $4.25 after company signals caution on growth


Black & Decker Corp. shares fell $4.25 each, or about 7 percent, to close at $53.625 yesterday after the Towson-based toolmaker posted fourth-quarter and year-end earnings that met forecasts, but cautioned that sales growth could slow this year.

Black & Decker said net income in the quarter that ended Dec. 31 was $91.6 million, or $1.03 per diluted share, compared with $97 million, or $1 per share, in the same period the year before. Excluding several one-time items and before restructuring expenses of 8 cents a share, the company earned $98.1 million, or $1.10 per share.

Analysts had expected Black & Decker to earn $1.10 per share, according to Zacks Investment Research.

Fourth-quarter sales were $1.27 billion, a 16 percent decline from $1.52 billion notched in the final quarter of 1997, largely due to businesses the company sold last year to tighten its focus, Black & Decker said.

"The quarter was in line with expectations," said analyst James Lucas, who follows the power-tool company for Janney Montgomery Scott in Philadelphia. "It's all about blocking and tackling from this point forward."

Lucas, who said investors overreacted to Black & Decker's revelation about lower sales growth, is keeping his "buy" rating on the stock.

Investors seemed to be spooked by comments the company made during a morning conference call with analysts. Company executives said economies abroad could lead to sales growth below the 4 percent to 7 percent many analysts had been counting on.

Boost in profits?

"What we did was signal that it was possible -- possible -- that because of economic conditions sales growth in '99 may not be in the 4 to 7 percent range. It could be slower than that," said Barbara B. Lucas, Black & Decker's senior vice president of public affairs.

Lucas said the company was steeling itself for the possibility by controlling costs and managing assets more efficiently. The company believes that it can boost its profit margins despite the slower growth, Lucas said.

That has allowed Black & Decker to nudge higher its guidance to Wall Street regarding the company's 1999 profit prospects. While it said last year that 1999 earnings could be about $3 per share, on the conference call yesterday Black & Decker told analysts that profit could range from $3.15 to $3.30 per share.

Janney Montgomery's Lucas thinks the Black & Decker story is a good one, citing its still-new focus on so-called "six sigma" quality -- which can drastically slash waste, and therefore, costs.

Full year losses, sales

For the full 1998 year, the company posted a net loss of $754.8 million, or $8.22 per share. However, excluding a goodwill write-off and restructuring charges, net earnings for the year were $246 million, or $2.63 per share, vs. $227.2, or $2.35 per share, in 1997.

For the full year, sales declined to $4.56 billion from $4.94 billion in 1997. The sales decline was entirely due to divested businesses.

Pub Date: 1/27/99

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