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Reasons Why You Should Avoid Betting on Stanley Black (SWK)

·3 min read

Stanley Black & Decker, Inc. SWK has been grappling with weakness in its Tools & Outdoor segment, persistent supply-chain constraints, raw material cost inflation and foreign-currency headwinds. These factors may adversely impact its earnings in the near term.

Let’s discuss the factors that might continue taking a toll on the firm.

Softness in the Tools & Outdoor segment due to reduced retail and consumer demand is weighing on Stanley Black’s performance. The segment is witnessing lower volumes due to reduced consumer spending as a result of hiked interest rates and a spike in fuel prices. SWK anticipates the Tools & Outdoor organic revenues to decline by mid-to-high-single digits in 2022.

Cost woes and expense inflation pose a concern for Stanley Black. In the first half of 2022, SWK’s cost of sales, and selling, general and administrative expenses expanded 32.7% and 23%, respectively, year over year. The effects of supply-chain restrictions and logistics cost increases are likely to continue hurting its margins and profitability in the near term.

Given Stanley Black’s vast international presence, it is exposed to currency translation risks. Even hedging activities might not be able to protect it from unfavorable fluctuations. In the second quarter, forex woes hampered SWK’s sales 2% on a year-over-year basis. The performance of its overseas business might be depressed by a stronger U.S. dollar in the quarters ahead.

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Due to these headwinds, shares of Stanley Black have lost 43% compared with the industry’s decline of 31.6% over the past six months.

Zacks Rank & Stocks to Consider

SWK currently carries a Zacks Rank #5 (Strong Sell).

Some better-ranked companies from the Industrial Products sector are discussed below:

Applied Industrial Technologies, Inc. AIT presently sports a Zacks Rank #1 (Strong Buy). AIT delivered a trailing four-quarter earnings surprise of 22.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks.

AIT’s earnings estimates have increased 6.7% for fiscal 2023 (ending June 2023) in the past 60 days. Its shares have inched up 2.8% in the past six months.

Valmont Industries, Inc. VMI presently has a Zacks Rank of 1. VMI’s earnings surprise in the last four quarters was 13.7%, on average.

In the past 60 days, Valmont’s earnings estimates have increased 3.8% for 2022. The stock has rallied 15.4% in the past six months.

Greif, Inc. GEF presently has a Zacks Rank #2 (Buy). GEF delivered a trailing four-quarter earnings surprise of 22.4%, on average.

GEF’s earnings estimates have increased 4.6% for fiscal 2022 (ending October 2022) in the past 60 days. Its shares have risen 7.8% in the past six months.

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Stanley Black & Decker, Inc. (SWK) : Free Stock Analysis Report
Valmont Industries, Inc. (VMI) : Free Stock Analysis Report
Applied Industrial Technologies, Inc. (AIT) : Free Stock Analysis Report
Greif, Inc. (GEF) : Free Stock Analysis Report
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