Welcome to earning season, my fellow Fools. We've already heard from a string of big names this month -- Apple, GE, and Lucent among them. Next up, an American icon: Tomorrow, Black & Decker
Wall Street Wisdom:
- General consensus. Sixteen analysts follow Black & Decker, and the mood is generally bullish. Seven of them rate the stock a "buy," and no one's so bold as to call for a "hold."
- Revenues. Black & Decker had an exceptionally good fourth quarter of 2004. That was good news back then, but tomorrow it will make comps correspondingly difficult to beat. Analysts think the company can do it, if only just barely. They expect to see a 4% year-over-year rise in sales.
- Earnings. The company should more than make up for the underwhelming sales growth with profits, however. Analysts believe the company grew its net by 19%, and will report $1.90 per share tomorrow -- the very top of the firm's October guidance range.
Margin watch:
In the Q3 2005 earnings release, CEO Nolan Archibald highlighted "continued raw material inflation" as one of the biggest challenges to Black & Decker's business. The effects of these high raw-material costs can be seen in the recent weakening of the company's gross margins. On the plus side, the company has managed to overcome these difficulties to date, continually boosting its operating margins and holding its net pretty steady close to 9%.
|
Margins% |
6/04 |
9/04 |
12/04 |
3/05 |
6/05 |
9/05 |
|---|---|---|---|---|---|---|
|
Gross |
36.3 |
36.7 |
36.4 |
36.0 |
35.6 |
35.3 |
|
Op. |
11.5 |
11.7 |
11.7 |
11.8 |
11.9 |
12.1 |
|
Net |
7.9 |
8.4 |
8.4 |
8.9 |
8.8 |
8.9 |
Foolish lookout:
Back in October, the company highlighted its Power Tools and Accessories division as the real force behind its strong operating margins (which incidentally, the CEO also predicted would continue to grow in Q4). Keep an eye on this division. So long as power tools do well, Black & Decker as a whole will do just fine.
Fool contributor Rich Smith does not own shares of any company named above.
