(Adds details on better-than-expected 3Q sales and analyst comment on potential impact on retailers; updates share price.)
By Mary Ellen Lloyd
Of DOW JONES NEWSWIRES
Black & Decker Corp. (BDK) said third-quarter earnings will be roughly twice its earlier forecast, helped by earlier-than-expected shipments of industrial power tools to retailers and better-than-expected margins.
An unexpectedly low tax rate and favorable trends in foreign currency translation were also factors as the tool maker raised its profit outlook to 91 cents a share from a July view of 35 to 45 cents a share.
Shares jumped 6.4% to $50.28. Barclays Capital on Monday also initiated coverage of the stock with an overweight rating and a $55 price target.
Black & Decker said sales are expected to have fallen 23% - analysts surveyed by Thomson Reuters most recently, on average, expected a 25% drop to $1.2 billion and earnings of 43 cents a share.
Chairman and Chief Executive Nolan Archibald said the modestly better revenue was largely due to shipping promotional items in its U.S. industrial power-tools and accessories business in the third quarter, not the fourth as had been planned.
The bulk of that group's sales are tied to the company's Dewalt brand of power tools, sold at Home Depot Inc. (HD), Lowe's Cos. (LOW) and other home-improvement retailers. Black & Decker's U.S. sales of industrial power tools and accessories have been especially weak in recent quarters, falling 30% from year-earlier levels in each of the two most recent quarters amid weak construction activity and retailers' efforts to lower inventories.
Black & Decker spokesman Roger A. Young on Monday declined to say which customers are readying for promotions or whether they are tied to the holidays, but he confirmed the sales increase isn't tied to any larger pickup in demand from the construction industry or other end markets.
"We specifically intended to indicate it was the timing" of shipments, he said. "But the margin impact is real, and that certainly is better than we expected."
Black & Decker has slashed its dividend and has taken other cost-cutting steps in an attempt to mitigate the impact of deteriorating markets, especially in Europe and the auto industry in general. Margins were aided in the latest quarter by that cost-cutting, said Archibald.
Tax adjustments in any given quarter can cause wide variance in its tax rates, the company added.
The Towson, Md., company boosted its 2009 earnings target in July to a range of $1.65 to $2 after second-quarter earnings topped expectations. On Monday, Black & Decker said it would update full-year guidance on Oct. 22 when it reports full results.
Analysts, on average, expect $1.63 a share in 2009 earnings on $4.66 billion in revenue.
Stifel Nicolaus analyst David Schick, who tracks home-improvement retailers, took Black & Decker's announcement as a positive sign for Lowe's and Home Depot as he also noted the federal government's appliance-rebate program is expected to take effect later this year or early next year.
"We note it is unlikely that appliances and power tools business gets better in a vacuum," he wrote in a note to clients reiterating buy ratings on Lowe's and Home Depot.
Home Depot shares recently traded up 1.4% at $27.34, while Lowe's shares were 1.6% higher at $21.28.
-By Mary Ellen Lloyd, Dow Jones Newswires; 704-948-9145; maryellen.lloyd@dowjones.com
(Kevin Kingsbury contributed to this story.)