July 24, 2009 / 4:27 PM / 9 years ago

UPDATE 3-Black & Decker Q2 profit beats Street, raises FY view

* Q2 EPS $0.63, Street view of $0.37

* Raises FY shr view to $1.65-$2, ex items

* Sees no significant improvement in end markets

* Shares rise as much as 12 pct (Recasts; adds details from conference call, analyst comment; updates share movement)

BANGALORE, July 24 (Reuters) - Tool maker Black & Decker Corp BDK.N raised its 2009 earnings outlook on strong second-quarter results that were helped by cost cuts and better margins, sending its shares up 12 percent.

However, the company, which also makes home improvement products, does not anticipate a significant improvement in end markets during the rest of the year, even as it said some metrics, such as U.S. housing starts and global automotive production, seemed to be bottoming.

Black & Decker, which said its end markets remained extremely weak in the second quarter, forecast a weak third quarter and also slightly widened its 2009 sales decline outlook.

Wall Street Strategies analyst Brian Sozzi said Black & Decker’s end markets were still in trouble and that sales trends will continue to be challenging.

Longbow Research analyst David MacGregor does not expect to see any signs of stabilization in the company’s end markets during the second half of the year.

He said sales in the second half would be down but that the company would probably get some raw material cost relief to help offset that.

Black & Decker expects sales for the year to be down 24 percent, wider than both its prior view of 20 percent decline and analysts’ forecast of a 22 percent decline.

For 2009, the company now expects earnings of $1.65 to $2 per share, excluding special items, up from its prior forecast $1.50 to $1.90. Analysts were looking for $1.58 a share.

It expects fourth-quarter sales decline to narrow, compared with the earlier quarters, due to some stabilization in the automotive industry.

The U.S. manufacturer has been facing a tough business environment due to the housing slump that has weakened demand for its power tools, locks and plumbing products.

The company has cut jobs and executive compensation since 2008 to help offset sales declines.

In April, it slashed its quarterly dividend by 71 percent to 12 cents a share and said employment level at the company was about 20 percent lower compared with the end of 2007.

Black & Decker shares have lost about 46 percent of their market value in the last year.

Earlier in the week, rival Stanley Works (SWK.N) posted lower profit and said it would take additional restructuring actions due to steeper-than-anticipated volume declines.


For the latest second quarter, Black & Decker’s net income fell 61 percent to $38.3 million, or 63 cents a share, from $96.7 million, or $1.56 a share, a year ago.

Revenue fell 27 percent to $1.19 billion.

Analysts on average were expecting earnings of 37 cents per share, before special items, on revenue of $1.19 billion, according to Reuters Estimates.

Results include a one-time benefit of 7 cents a share, the company said.

Analyst Sozzi said the company beat profit estimates on better-than-expected operating and gross margins. He also said the company has improved its short-term liquidity measures.

The company expects third-quarter profit of 35 cents to 45 cents a share and sales to decline similar to the fist two quarters.

Wall Street was looking for 52 cents a share.

Shares of the company were up $3.32 at $37.04 in midday trade on the New York Stock Exchange. They earlier touched a high of $37.75. (Reporting by A. Ananthalakshmi in Bangalore; Editing by Jarshad Kakkrakandy, Gopakumar Warrier and Unnikrishnan Nair)

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