You can refer to World Wide Web inventor Tim Berners-Lee as Sir Berners-Lee now. The Queen of England knighted the 49-year-old computer scientist at Buckingham Palace on Friday. Back in April, Sir Berners-Lee received a $1.2 million cash award for his achievements in technology, but landing in the company of Sir Mick Jagger, Sir Elton John, and Sir Paul McCartney is priceless. Congrats.

In today's Motley Fool Take:

Black & Decker's Blowout


Seth Jayson

The tool trade is definitely not boring -- at least not if you hold shares of Black & Decker(NYSE: BDK) these days. Following today's earnings release, the firm shot up to a 52-week high, making it almost a double off the past year's low.

Investors seemed to like the news this morning: earnings per share up 56% to $1.50. But comparable revenues from continuing operations were up 11%, though that is 19% if you include foreign exchange gains. The firm's oversized earnings growth came through a 1.8% increase in gross margin and a 1.7% improvement in operating costs.

And as though that wasn't enough to get the Street screaming, "Buy," the company also announced the $775 million acquisition of Pentair's(NYSE: PNR) tools group. The move gives Black & Decker a foothold in compressor and pressure equipment, along with metal and masonry tools in Europe.

The list of competitors to Black & Decker seems to get smaller every time we write about the firm. Nowadays, Stanley Works(NYSE: SWK), Makita(Nasdaq: MKTAY), and Danaher(NYSE: DHR), which makes tools for Sears(NYSE: S), are the notables among a dwindling crowd.

When I last opened my big, fat mouth about Black & Decker, I warned that the company didn't have a history of churning up the kind of free cash flow (FCF) that you might expect from a mature powerhouse. It was the prime reason I thought the stock was fully priced. I may need to revise that opinion.

After turning in FCF of $198 million so far this year, management forecasts $360 million in FCF for the full year. That would give the firm an enterprise value-to-FCF ratio of around 15, which is a discount to the market in general, but not a screaming bargain.

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Fool contributor Seth Jayson owns plenty of Black & Decker tools, but he has no position in any firm mentioned. View his Fool profile here.

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3M Strong Despite Stock's Slip


Roger Nusbaum

3M (NYSE: MMM) , maker of Post-It Notes and Thinsulate, among many other items, reported second-quarter earnings this morning of $0.97 per share versus an estimate of $0.96. Revenues came in a bit light, at $5.01 billion, compared with expectations. 3M earned $0.78 per share in last year's second quarter and had revenues of $4.6 billion in that period. The firm raised guidance for its fiscal year, but not enough to satisfy the Street. In reaction, the stock was down more than 4% in early trading.

3M's metrics still look very good, though. The firm's ROE is 35%, and it has very little debt. 3M trades at 20 times earnings for 2005, which is about the same as the market's P/E for 2005. It has a beta of 0.49 and has substantially outperformed the S&P 500 over the last five years. Earnings are expected to grow by 12% in 2005 while revenue estimates look for 8% growth.

If you're not familiar with 3M, all you need to do is look around the house. Like fellow consumer product giant Procter & Gamble(NYSE: PG), 3M boasts impressive brands. The conglomeration sports "subsidiaries in more than 60 countries, including manufacturing operations in 38 and research and development facilities in 29." 3M makes thousands of products in diverse areas, including technology, office supplies, automotive, medical, and food services.

To begin to understand the company's success is to know that CEO James McNerney worked at the conglomerate of all conglomerates, General Electric(NYSE: GE), for 15 years under Jack Welch. While not all Welch disciples have done well, 3M has thrived under McNerney's stewardship.

What does this mean for the future? Every page I visited on the 3M website had the word "innovation" across the top. It is clear that the company will not be static. Remember that it is a conglomerate. This type of company is more difficult to manage than a company that focuses on one major area of business and other product lines that have synergies with that main business.

Generally speaking, conglomerates are more difficult companies to run. To buy shares in the company is to realize that one day this could be an issue, but not now. The stock's outperformance shows that the market looks favorably on the job done by Mr. McNerney so far.

The stock is viewed by many to be a cyclical stock and has had a high correlation to Morgan Stanley Cyclical Index, but it has outperformed that index. I think the biggest obstacle for shareholders at this point would be a downturn in the cyclical group caused by some sort of macroeconomic problem such as an economic downturn or costs of goods sold going way up.

Fool contributor Roger Nusbaum is an investment manager and wildland firefighter in Prescott, Ariz. At press time, neither he nor his clients owned any of the stocks mentioned.

Discussion Board of the Day: Living Below Your Means

Are you spending more than you are saving? When's the last time you took the time to map out a budget? Check out the Living Below Your Means discussion board to see what others are saying.

Commodities Wallop Kraft


Phil Wohl

Growing up, kids often wished they could be an Oscar Meyer Wiener because, as the classic slogan says, "If I were an Oscar Meyer Wiener, then everyone would be in love with me." To say that the investment community will not be in love with wiener-maker Kraft Foods(NYSE: KFT) today would be as obvious as saying that Lance Armstrong enjoys riding his bike.

With many companies in the food business confronting rising commodity prices, it has become clear that preparation and planning were held at a premium at companies such as ConAgra(NYSE: CAG) (see ConAgra's Results Pop) while others failed to anticipate the increase and pass the costs through to consumers. One such company is Kraft Foods, which today reported second-quarter earnings that were 26% lower than last year's results (but in line with the consensus estimate).

It seems that every time I go to the supermarket, the price of milk keeps rising. I've been drinking a glass of milk just about every day since I was a little dude (at 6'6", I owe a lot of my growth to milk and the medieval rack my parents stretched me on in our basement for years). Cheese prices have been rising, too, though I don't eat much of the delectable favorite of mice and men.

With the price of cheese rising in excess of 70% in the second quarter, Kraft apparently needs some time to adjust. Thus, it has lowered its earnings expectations for 2004 to a range of $1.55 to $1.62 per share from its previous forecast of $1.63 to $1.70 per share. This outlook puts a crimp in the company's sustainable growth plan and will also cause prices at the retail level to rise in the near term.

Major food producers such as ConAgra, Kraft, Sara Lee(NYSE: SLE), and Nestle continue to battle surging commodity prices like my wife and I struggle to keep up with our growing kids' appetites. Kraft must be thankful for its non-cheese Nabisco line, which has been branching out with healthier versions of its Oreo, Wheat Thins, and Triscuit snacks.

While I would like to see Kraft Foods be a lot more responsive and forward-thinking toward commodity trends, it is clear that the company has an extremely strong brand name to go along with its well-known and liked branded products (Nabisco, Oscar Meyer, Philadelphia, Post, and Maxwell House). With the company's operating picture a bit out of focus, I would recommend the 2.38% dividend-yielding shares purely to income investors only.

Fool contributor Phil Wohl spent more than 12 years on Wall Street and now concentrates his writing on more fictional characters. He has no stake in any firm mentioned above.

Quote of Note

"The chief business of the American people is business." -- Calvin Coolidge

Mattel Makes the Grade


Alyce Lomax

(TMF Lomax)

It's no secret times are tough for toys these days. For now, toy maker Mattel(NYSE: MAT) has bucked that trend, reporting improved second-quarter earnings. However, trouble on the horizon includes weakness in the company's quintessential Barbie brand.

Second-quarter earnings at Mattel improved 12% to $23.5 million, or $0.06 per share. Mattel eked out a 4.6% gain in revenues, to $804 million. Despite the good showing, the company admitted the climate remains challenging.

For many of us grown-ups, thinking of toys for girls might very well bring Barbie to mind. She played a part in many a little girl's childhood. Despite the doll's longevity (she's been around since 1959), sales of Barbie products, which have been weak of late, decreased by 13% in the second quarter.

Taking Barbie out of the picture, other stalwart brands Mattel provides include Fisher-Price, Hot Wheels, and American Girl, all of which saw better fortunes, with Hot Wheels showing particular strength, with a 37% increase in global sales. Mattel also said it had some success from sales of Harry Potter-related toys, surely boosted by the summer release of The Prisoner of Azkaban.

Today's showing by Mattel beats that of Hasbro(NYSE: HAS), which, as Fool contributor Phil Wohl noted last week, wobbled like its Weebles as it reported some disappointing numbers. What with several major toy stores' bankruptcies and aggressive price cuts from top toy purveyor Wal-Mart(NYSE: WMT), these are tough times for toys indeed.

Mattel's initiatives include bringing Barbie back into popularity (one might hope that it might come up with alternatives other than a Barbie-branded adult clothing line, an opinion I made known recently). Mattel also hopes to strengthen its electronic learning products, which seems a wise move considering modern kids' far more technological leanings and parents' interest in stimulating young minds.

Earlier this morning, shares of Mattel increased as much as 8% on the earnings news as investors glossed over what the company still called a challenging year ahead. It is heartening that strength in other brands made up for Barbie issues. However, what with the troubles in toyland and the possibility that Barbie needs the sales equivalent of a shot of Botox, such euphoria may be a bit premature.

Alyce Lomax does not own shares of any of the companies mentioned.

More on Today

In Drug Fails, Get Sued, Charly Travers takes a look at a troubling trend in the biotech sector.... Mathew Emmert's Pay Up, Mr. Softy asks why, given Bill and Melinda Gates' acts of philanthropy, is Microsoft so stingy when it comes to paying shareholders?... In Bulls on Parade, Bill Mann calls into question recent euphoric statements that the economy is on the rise.

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For a list of all our stories from today, see our Today's Headlines page.