Black & Decker is rising with the U.S. housing sector's recovery

Posted Nov 2nd 2009 3:20PM by Joseph Lazzaro
Filed under: Black and Decker (BDK), Stocks to Buy

As expected, Black & Decker Corporation's (NYSE: BDK) stock is recovering ahead of the U.S. housing sector's better days, which is why I'm Reiterating my Buy rating for the company's shares, first recommended on April 17, 2009 at a price of $33.53. If you bought BDK in April, you're up about 42%.

Look for a 4-7% revenue increase for BDK in FY2010, and an 8-10% gain in FY2011, mostly on the U.S. housing sector's stabilization, which will boost the company's power tools and home improvement segments. In this case, 'less bad is good enough' for Wall Street: only mild housing sector growth is forecast, but given the housing sector's three-year swoon, it will look like a day at the beach.

Meanwhile, cost controls remain adequate. The First Call FY2009/FY2010 EPS estimates for BDK are $2.53 to $2.89. That $2.89 FY2010 EPS estimate will likely prove to be a tad low.

Technically, Black & Decker's chart is strong: an uptrend, and the stock recently registered a golden cross - which is the 50-day moving average crossing above the 200 day moving average. Further, the stock has penetrated psychological resistance at $50, and a recent pull-back constitutes a Buy opportunity.

Stock Analysis: Black & Decker Corporation is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 50% position in BDK now; then buy another 25% in one month, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your BDK position before December 2009. Sell/Stop Loss if you were to buy shares in this company: $17.

Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

Tags: bdk