Stanley Black & Decker: Earnings Beat Est.

Zacks

Industrial tool maker, Stanley Black & Decker (SWK) reported earnings per share from continuing operations of $1.03 in the first quarter of 2013, up from 98 cents reported in the year-ago quarter and above the Zacks Consensus Estimate of 96 cents.
 
GAAP earnings per share, including 51 cents of one-time charges, were 52 cents for the quarter.

Revenue

Stanley Black & Decker reported net revenue of $2,487.2 million in the first quarter, up 2.5% year over year. The increase can be attributed to a 4% contribution from acquisitions, offset by roughly 1% decline each in volume and currency. Price was flat in the quarter.

Revenue in the CDIY segment (47.9% of first quarter 2013 revenue) rose 1.7% year over year to $1,192.4 million, while the Security segment (24.1%) reported revenues of $599.4 million, reflecting a year over year increase of 1.2%. Industrial segment (28.0%) sales soared 5.0% to $695.4 million.

Margins

In the first quarter 2013, normalized cost of sales for Stanley Black & Decker, as a percentage of revenue was 62.8% versus 62.3% reported in the year-ago quarter. Gross margin was down 50 basis points to 37.2%, due primarily to higher cost of sales incurred in the quarter.

Selling, general and administrative expenses registered a year-over-year increase of 4.2% and as a percentage of revenue augmented by 50 basis points to 25.6%. Operating margin in the quarter was 11.6% versus 12.5% in the year-ago comparable quarter.

Balance Sheet

Cash and cash equivalents of Stanley Black & Decker exiting the first quarter 2013 were down 22.1% sequentially from $716.0 million to $557.5 million. Long-term debt (net of current portions) was also down 0.9% to $3,494.1 million as compared with $3,526.5 million in the previous quarter.
 
Cash Flow

Normalized net cash flow from operating activities was ($64.1) million in the first quarter 2013 for Stanley Black & Decker versus $29.2 million in the year-ago quarter. Capital spending jumped 80.5% year over year to $68.4 million. Net cash utilization together with higher capital spending resulted in a negative free cash flow of $132.5 million versus a negative $8.7 million in the year-ago quarter.

Stanley Black & Decker expended approximately $79.1 million in paying dividends to shareholders in the first quarter 2013.

Outlook

For 2013, management of Stanley Black & Decker reiterated its guidance provided earlier. Earnings per share, excluding one-time charges, are expected to be within the $5.40-$5.65 range on the back of 2%-3% organic net sales growth.

Stanley Black & Decker anticipates realizing cost synergies of approximately $100 million, including the final amount of $50 million from the Black & Decker and $50 million, up from $35 million expected earlier from the Niscayah acquisitions, in 2013.

GAAP EPS for 2013 is expected to be in the range of $4.46-$4.71 versus $4.62-$4.87 predicted earlier. Free cash flow is projected to be roughly $1.0 billion.

Stanley Black & Decker manufactures tools and engineered security solutions across the globe. The stock currently carries a Zacks Rank #3 (Hold).

Other companies to watch out for are Lincoln Electric Holdings Inc. (LECO)—reported adjusted earnings of 92 cents per share, up 21% from 76 cents earned in the year-earlier quarter and way ahead of the Zacks Consensus Estimate of 78 cents; Actuant Corporation (ATU)—expected to report on Jun 19, 2013; and Hardinge Inc. (HDNG)—expected to release on May 6, 2013.
 
 

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