Black & Decker Outperforms Despite Falling Revenues

Feb. 3.10 | About: Stanley Black (SWK)

Black & Decker Corporation (BDK) reported fourth-quarter earnings of 55 cents per share compared to 72 cents in the fourth quarter of 2008. The reported quarter earnings include $58.8 million of pre-tax expenses related to the proposed merger with The Stanley Works (NYSE:SWK), while 4Q08 earnings include a $20.8 million pre-tax restructuring charge.

Excluding these one-time charges, Black & Decker reported earnings of $1.24 for the fourth quarter of 2009, compared to $0.96 in the fourth quarter of 2008. The Zacks Consensus Earnings Estimate for the quarter was 76 cents per share.

Revenue in the quarter was down 6% year over year at $1.3 billion. This includes a favorable currency translation impact of 4%. The company witnessed sales declines in all three segments. The Power Tools and Accessories segment posted an 11% decline in sales due to lower construction activity and weak demand for discretionary items.

Sales in the Hardware and Home Improvement segment were down 4% due to a double-digit decline in faucet sales. Fastening and Assembly Systems posted 2% decline in sales with weak demand in Japan and flat sales in other key regions.

However, sales were better than the company’s expectations in all three segments. Management said that the company benefited from improved economic activity in certain regions and businesses.

For the full year 2009, Black & Decker reported earnings of $2.17 per share, compared to $4.77 in 2008. Excluding merger related expenses in 2009 and restructuring charges in both 2009 and 2008, the company’s earnings were $3.01 for 2009 against $5.41 in 2008. The Zacks Consensus Earnings Estimate for 2009 was $2.53 per share.

Black & Decker generated operating cash flow of $584 million for 2009, which was significantly higher than its expectations of $400 million. The company reduced its debt by $632 million during the year.

Black & Decker expects mid-single digit increase in sales for the first quarter of 2010 and a low single-digit growth rate for the full year. Also, it forecasts a 200 basis point year over year improvement in operating margin for the first quarter and an improvement of 100-150 basis points for the full year.

These projections do not include the impact of the proposed merger with Stanley Works. The company did not provide EPS guidance due to this pending merger, which is expected to close in the first half of 2010.