SWK Issues $750M Debentures

Zacks

Stanley Black & Decker, Inc.(SWK) recently issued junior subordinated debentures worth $750 million; maturing on July 25, 2052. The issue was offered at $25 per debentures or 100% of principal amount.

The debentures carry a coupon rate of 5.75% to be paid quarterly by the company, with the first installment accruing on September 15, 2012. The debentures carry a Baa2 rating from Moody’s, BBB+ from S&P and BBB from Fitch.

In the recently reported second quarter 2012 results, the company reported a 0.6% sequential increase in its long-term debt balance (net of current portions) which settled at approximately $2.9 billion. Net interest expense in the quarter rose 20.5% to $32.3 million.

Also, the quarter’s earnings per share from continuing operations came in at $1.32, down 9.6% from $1.46 reported in the year-ago quarter. GAAP EPS including 40 cents of merger related charges was 92 cents compared with $1.14 in the second quarter of 2011. Net revenue increased 8.1% year over year to roughly $2.8 billion, due primarily to a 1% unit volume improvement, a 1% positive price impact and 10% positive impact from acquisitions. These were, however, offset by a 4% negative currency translation impact.

The current Zacks Consensus Estimate for the third quarter of 2012 is $1.60, representing a year-over-year increase of 19.48%. Estimates for the fiscal years 2012 and 2013 are $5.60 and $6.55, reflecting annual growth of 6.87% and 16.93%, respectively.

Stanley Black & Decker manufactures tools and engineered security solutions across the globe. Prime competitors of the company are Danaher Corp. (DHR), Makita Corp. (MKTAY), and Snap-on Inc. (SNA).

We currently maintain a Neutral recommendation on Stanley Black & Decker. The stock also bears a Zacks #5 (Strong Sell) Rank.

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