Black & Decker raises its 3Q earnings forecast
NEW YORK — Black & Decker Corp. shares rose sharply Monday after it raised its third-quarter profit outlook because of cost-cutting and lower prices for parts, as well as a lower tax rate.
The increased guidance pushed Black & Decker’s stock up $3.58, or 7.6 percent, to $50.28.
Earlier this year, the company said it would cut 1,200 jobs and lower base salaries of top executives, as well as end contributions to retirement programs because of economic weakness. Black & Decker also cut base salaries for other U.S. workers by between 2.5 percent and 5 percent.
Partly because of that cost-cutting, the power-tool maker now expects earnings of about 91 cents per share, up significantly from its prior profit forecast of 35 cents to 45 cents per share. Black & Decker said the lower tax rate will likely add about 14 cents per share to its performance.
Analysts were predicting third-quarter profit of 45 cents per share, according to a Thomson Reuters poll. Analysts’ estimates normally exclude one-time items like the tax benefit.
In a statement, Chief Executive Nolan D. Archibald said the cost-cutting combined with lower-than expected prices for components to boost profit margins.
Despite what Black & Decker called “better-than-expected sales,” the company said it still expects sales to fall 23 percent compared with the same quarter last year. The extended slowdown in construction and consumers’ pullback on discretionary purchases like power tools during the recession have hurt Black & Decker’s sales.
Revenue is coming in better than expected partly because of earlier shipments leading up to the holidays that hadn’t been anticipated until the fourth quarter.
The company — whose tool brands include Dewalt and Delta as well as its namesake brand — also benefited from favorable currency translation.
Nicholas Heymann of Sterne Agee & Leach raised Black & Decker’s price target to $56 from $41 but said in a client note that he is pleased with the revenue outlook but cautioned that the company could face more difficulties during the second half of 2010 if the global economy slows.
Black & Decker, which is based in Towson, Md., plans to report its quarterly results Oct. 22 and expects to update its outlook for the year then.
AP Business Writer Betsy Vereckey in New York contributed to this report.
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