Dec. 15 (Bloomberg) -- Black & Decker Corp., the biggest U.S. maker of power tools, cut its annual profit forecast for the third time after a U.S. housing slump ``significantly'' reduced sales. The shares fell the most in 10 years.

Black & Decker said 2006 earnings per share will be $6.50, down from an October forecast of as much as $7.05. There may be ``additional pressure on our earnings'' if the housing market doesn't improve, said Chief Executive Officer Nolan Archibald.

Fourth-quarter sales will probably fall 8 percent as demand for power saws and drills waned with an 18 percent decline in new-home sales this year through October. The slowing housing market also caused Illinois Tool Works Inc., the maker of Duo- fast nail guns, to cut its profit forecast.

``It's spreading, and we don't know how far and how wide it's going to spread,'' said Marvin Roffman, president of Roffman Miller Associates in Philadelphia, which manages $390 million, including Black & Decker shares. ``Be prepared for more disappointment from Black & Decker and others'' who rely on the housing market.

Black & Decker said fourth-quarter earnings per share will be as much as $1.35, down from a previous forecast of up to $1.90. The average estimate of 11 analysts surveyed by Bloomberg News is $1.87 a share.

Shares of the Towson, Maryland-based company fell $8.66, or 10 percent, to $78.26 at 4 p.m. in New York Stock Exchange composite trading. It was the biggest decline since December 1996. Illinois Tool's stock dropped 2.3 percent.

Power Tools

Retailers reduced inventories and bought fewer tools, creating ``significant challenges'' in the first half of 2007, Black & Decker said. The company's biggest buyer is Home Depot Inc., accounting for about 21 percent of sales. Lowe's Cos. is second, with 13 percent.

Excluding gains from Black & Decker's March acquisition of Vector Products Inc. and favorable currency exchange rates, sales may decline 12 percent in the fourth quarter, Archibald said today on a conference call with analysts and investors.

Sales of the company's U.S. power tools and accessories may drop about 20 percent excluding acquisitions, Archibald said. Black & Decker's hardware and home-improvement division sales may fall in the ``low-to-mid single digits.''

Archibald said most of the sales decline is for industrial tools such as its higher-priced DeWalt line, without giving specific figures. Black & Decker's own inventory hasn't changed materially since the same period last year, and the company hasn't lost market share, he said.

``We're taking the pain in the fourth quarter here by the actions we're taking,'' Archibald said.

More `Pressure'

Black & Decker depends on U.S. housing starts for 20 percent of its sales, Archibald said. Housing starts in October fell to the lowest level in six years, as builders broke ground on new dwellings at an annual rate of 1.486 million, down 14.6 percent from September, according to the Commerce Department.

If the housing market doesn't improve ``there will be pressure on our earnings,'' Archibald said.

``Most disappointing, in our view, is Black & Decker expects their disappointing trends will continue well into 2007,'' wrote Michael Rehaut, analyst with JP Morgan in New York, who rates the shares ``neutral.''

Stanley Works, the world's biggest maker of hand tools, lowered its full-year sales forecast in October to a gain of at most 23 percent, from a previous forecast of as much as 26 percent. The New Britain, Connecticut-based company is closing two factories in France, shrinking others in the U.K. and Italy and shutting four distribution centers in Europe to cut costs and improve competitiveness.

To contact the reporter on this story: Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net.

Last Updated: December 15, 2006 16:32 EST