Yesterday was nightmarish for investors in Black & Decker (NYSE: BDK) as the stock price plunged 21%. In fact, it was the worst one-day performance since 1987.
Like most other companies, Black & Decker got buzz-sawed in the fourth quarter. Revenues fell by 16% to $1.38 billion, with earnings coming to $44 million, or $0.73 per share. This compares to earnings of $184 million, or $2.94 per share in the same period a year ago.
To deal with the situation, Black & Decker plans to slash its payroll by 1,200 employees, which account for 5% of the workforce.
For the most part, the weakness was widespread, in terms of the product line and geographies. Although, a big drag continues to be the weak housing market in the U.S. as well as problems in commercial construction.
Even the decline in commodities prices has been little help. Keep in mind that Black & Decker has contracts that lock-in prices for the first half of 2009.
The negative momentum is also continuing into 2009. Black & Decker projects Q1 earnings of $0.05-$0.15 per share. Bear in mind that consensus estimates were at $0.75 per share.
Unfortunately, Black & Decker expects double-digit declines in organic sales for the first three quarters of 2009. No doubt, this is fairly grim news – and should put a lid on the stock price for awhile.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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