Stanley Black & Decker Inc. shares fell for a second session Thursday, after the tool company lowered its projections for the year.
THE SPARK: The company posted a 44 percent jump in third-quarter profit early Wednesday, but cut its forecast for the year, citing poor profitability improvements in its security division, slower growth in emerging markets and uncertainty created by the U.S. government's budget cuts and shutdown.
It now expects 2013 adjusted earnings of $4.90 to $5 per share, which falls short of average analyst expectations.
THE BIG PICTURE: Congress reached an agreement late Wednesday to avoid a catastrophic debt default and reopen the federal government. The deal approves government funding only through Jan. 15 and gives the government the authority to borrow what it needs through Feb. 7.
President Obama signed the measure Thursday and directed all federal agencies to reopen promptly after a 16-day shutdown.
However, the agreement provides a temporary solution, which means a cloud will remain over the economy. The risk of another government shutdown and doubts about the government's borrowing authority remain.
The company said that uncertainty created by the budget impasse had a negative effect on business, consumer confidence and spending levels.
THE ANALYSIS: Raymond James analysts were highly critical of the company's failure to warn investors earlier of this change in its full-year picture, and questioned whether that indicates a bigger concern.
"Why should investors believe management is being overly conservative today when it was obviously so aggressive prior to 3Q?" analysts led by Sam Darkatsh wrote in a research note Thursday.
They also suggested that the risk of an activist investor stepping in may be increasing, given its sagging performance and mounting investor frustration.
The analysts lowered their earnings estimates, but maintained a "Market Perform" rating on the company for now.
SHARE ACTION: Shares of the company fell $2.15, or 2.8 percent, to $74.61 in afternoon trading. The stock plunged 14 percent Wednesday and is now up less than 1 percent since the start of the year.
Source: http://news.yahoo.com/stanley-black-decker-shares-continue-175427060.html
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