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Driving Black & Decker

Black & Decker (BDK), a leader in power tools and home-improvement gear, has recently stirred, whizzing from 40 on Sept. 30 to 47.81 on Oct. 29. Robert Stovall of Wood Asset Management, which owns shares, says some pros are starting to recognize that B&D is an "undervalued and ignored blue-chip." Despite the rise, he sees the stock surging to 58 in a year. Stovall notes that some analysts lifted 2003 and 2004 earnings forecasts after B&D handily beat their third-quarter estimates

The Street had been down on B&D amid doubts over the strength of consumer spending. But B&D's top brands, says Stovall, are going gangbusters at Home Depot and Lowe's, despite fierce rivals -- including Home Depot's private-label tools. Michael Rehaut of J.P. Morgan rates B&D "outperform." Brisk sales growth, he says, plus $120 million in savings from a restructuring are exceeding his expectations. So he has raised his 2004 estimate from $4.20 a share to $4.50 -- vs. the $4.26 Street consensus. His 2003 forecast is $3.95, vs. 2002's $3.23. If he's on the mark, then B&D is trading at 10.4 times 2004 earnings, vs. 17 for the Standard & Poor's 500-stock index.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them. By Gene G. Marcial

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