Through The Fly's Eyes: Black & Decker

from Eric Buscemi of Theflyonthewall.com









Blow Out Results; Could Be Positive For Home Depot & Lowe's

If one were to extrapolate the awful results from homebuilders and construction suppliers and apply it to Black & Decker's (BDK)), you would have been wrong -- BIG TIME.

Black & Decker's stock was up over $5 in after-hours trading on blow-out earnings results last night. How did this happen?

Nolan D. Archibald, Chairman and Chief Executive Officer, said, "The Power Tools and Accessories segment benefited from strong international performance and favorable order patterns in the U.S. As a result, we expect to report first-quarter sales and earnings significantly above the guidance we issued in January."

Black & Decker cut its earnings forecast a number of times last year as slowing construction dampened demand for its products. In January, Black & Decker said it expected sales and earnings to decline in the first half of 2007. However, its orders have stabilized and large customers began a modest restocking of its products. Very Interesting!

Black & Decker's result might portent good things for the two big box retailers -- Home Depot (HD) and Lowe's (LOW). In the most recent conference call for the do-it-yourself companies, despite reporting horrific results, management suggested the worst of the downturn would end in the first half of 2007. Black & Decker's results might support their claim.

"However, we continue to anticipate a challenging economic environment. Therefore, we only expect to increase our full-year EPS guidance slightly when we report first-quarter results later this month," Archibald added. Sounds like a cover your bases type of statement.

Home Depot and Lowe's have become very cheap stocks. Black & Decker stock had a big run last night. Maybe the big-box retailers are set to do the same.