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Is Now the Time to Nail Down Black & Decker?


Yesterday's move was big, but consider it on a pullback.

Well, look at it this way: After today, only three days till the weekend.

Asian stocks rose overnight. The Hang Seng and the Nikkei were up 0.79% and 0.6% respectively. However, European stocks were in negative territory early this morning. And here in the US, we're currently trading lower.

Here's what I'm seeing this morning:

Black & Decker (BDK):
The Maryland-based toolmaker received a lot of attention yesterday after it upped its third-quarter guidance to $0.91 from the $0.35-$0.45 range.

1. I think it's pretty safe to say that we're going to see the full-year analyst estimate get cranked up in the next few days, which could give the shares a nice little goose.

2. But it's not the total blowout it appears to be at first blush. Consider the following line in the release: "A lower tax rate, due to certain favorable tax adjustments recognized in the third quarter, is expected to contribute approximately $0.14 to EPS for the quarter versus the Corporation's previous guidance."

3. I sense that some are taking that $0.91, multiplying it by four, and saying, "wow this company is going to earn more than $3.60 in the coming 12 months." I don't think that's going to happen. As I write, the estimate for next year is $2.27. But even if it were to put up $3 next year, it would still trade at about 16.9 times that estimate, which isn't totally cheap.

4. I like the stock and the move it had yesterday, but I'd rather nail it down (get it?) on a pullback.

Goldman Sachs
The Meredith Whitney Advisory Group lopped its rating from Buy to Neutral.

My two cents:

1. As I mentioned in this column previously, Goldman isn't particularly pricey in my view. It's my favorite pick of the litter. But Whitney whipping out the axe certainly isn't going to help the situation today.

2. My gut tells me not to catch the proverbial falling knife and to see where it settles before pondering whether or not to dip my toe in the water.

3. From a long-term perspective, a sell-off could create an interesting opportunity.
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No positions in stocks mentioned.

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