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$55.82 -0.05 (-0.09%)
10/6/2008 4:02 PM

The Black & Decker Corp (BDK)

CAPS Rating:
***

A global manufacturer and marketer of power tools and accessories, hardware and home improvement products and technology-based fastening systems.

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Avatar NetscribeManufac (65.49) Submitted: 11/17/06 10:18 AM : Underperform Start Price: $84.14 BDK Score: 8.70

Black and Decker co-founded by S. Black and Alonzo Decker in 1910, has its business divided into three major segments. Power tools, hardware - home improvement and fastening - assembly system. The Company is a market leader generating close to 40% of the industry revenues, of which power tools segment generate major portion through its top performing brands like Kwikset and Weiser Lock.

New and existing household sales along with household remodeling activity are the major drivers of the company’s revenue. BDK derives 20% of its revenues from new housing construction in US, however new housing construction has been facing slow down. National Association of Realtors project that existing home sales will decline by 4.7% to 6.74 million homes in 2006, down from a record 7.07 million in previous year, and this trend is expected to continue in 2007.

The Company’s accomplishing double digit sales growth can be accredited to its strategy through aggressive acquisitions and repurchase of common stock. However, absence of such strategy should see company’s performance slowing down.

Further, BDK is highly debt leveraged compared to its peers, with dormant sales in recent past, along with mounting prices of materials, company’s margins are declining. If such trend prolongs company might face trouble to service their debt. Along with slower remodeling activity and alarming inventory levels, BDK seems on its way to a down trend.

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Avatar hanakookie (88.53) Submitted: 12/22/06 6:37 PM

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Exactly the way I see it. If the amount of forclosures as my benchmark continues to increase then the stability of the company to be able to turn a dollar is going to be hard. Now with decreasing sales on the limbs then it's left over for management to deal with the tough decisions of how to cut through tis. I think the debt problem is going to stay because those who live with debt as a leverage point will live that way always. Too bad when things were going good they just didn't reduce debt and let shareholders value increase when they need it the most ( in a down swing).

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Avatar NetscribeManufac (65.49) Submitted: 5/18/07 8:24 AM

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Black and Decker witnessed a relatively strong quarterly performance with 1Q’07 revenues observing a modest rise of 3% to $1.58 billion. The rise can primarily be attributed to improved sales from unaffiliated customers in the power tools & accessories segment. While healthy contribution from the acquired Vector business and positive impact of foreign currency translation, also aided to boost the top-line. However, it’s the Net Income that felt the brunt of unfavorable housing market, notching $108.1 million a 4% decline, led by drop in operating and net margins.

The EPS of the Black and Decker in the present quarter registered an upswing of 11% to $1.61, primarily driven by company’s strategy of generating inorganic growth by buyback of stocks. Although such a strategy might continue to generate a sizable return in form of EPS growth, the real value addition by the company appears to be missing, as a result of massive size and ever reducing growth opportunities.

Going ahead, the US housing slowdown will continue to lay an impact on the top-line and though growth in international operations like Europe and Latin America can come to its rescue, the contribution will be miniscule as US market contributes the major chunk of the top-line. Moreover, though the inventory levels have observed a decline, it’s the rise in long term debt that continues to cause concern. Further as company itself estimates revenues to be flat for the coming quarter, and no major acquisition in sight to take the stock forward, it will be better to stay away from the stock, especially when we consider the current price of the stock that hovers around its all time high.

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