Reasons Why it is Worth Investing in Stanley Black (SWK) Now
Stanley Black & Decker, Inc. SWK seems to be an attractive option for investors seeking exposure in the manufacturing tools space. Solid performance in the last reported quarter along with healthy fundamentals and sound growth prospects enhance the stock’s attractiveness.
The company, with a market capitalization of $32.7 billion, engages in making and providing tools (power and hand tools) and related accessories. It also provides healthcare solutions, engineered fastening systems, electronic security solutions, and other items and services.
It presently has a Zacks Rank #2 (Buy). The company belongs to the Zacks Manufacturing - Tools & Related Products industry, which comes under the ambit of the Zacks Industrial Products sector. The industry is among the top 26% (with the rank of 65) of more than 250 Zacks industries.
In the past six months, the company’s shares have gained 8.4% compared with the industry’s decline of 3.6%. Notably, the S&P 500 expanded 14.2%, while the sector advanced 11.5% in the same timeframe.
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Below we discussed why Stanley Black is a worthy investment option.
Earnings Performance and Projections: The company reported better-than-expected results for first-quarter 2021. Its earnings surpassed the Zacks Consensus Estimate by 22.3% and sales beat the same by 5.03%. On a year-over-year basis, its earnings grew 34.1%, owing to sales and margin growth.
In the quarters ahead, the company is poised to benefit from solid product offerings; focus on innovation; surge in the e-commerce business; and growing demand for home improvement, home & garden, health and safety products. Also, its cost actions and margin resiliency program are anticipated to benefit in the quarters ahead.
For 2021, Stanley Black anticipates adjusted earnings of $10.70-$11.00 per share, higher than the previously mentioned $9.70-$10.30. Revenues, organically, are projected to grow 11-13% year over year, with growth of 4-6% for Security, 14-16% for Tools & Storage, and 4-6% for Industrial.
Buyout Actions: Stanley Black has been benefiting from synergistic gains from acquired assets over time. In the first quarter of 2021, the Consolidated Aerospace Manufacturing (“CAM”) buyout boosted Industrial sales by 3% from the year-ago quarter. Notably, the CAM buyout was completed in February 2020 and since then has been boosting the company’s engineered fastening business. Also, Stanley Black’s acquisitions had a positive impact of 1% on its Security segment sales in the first quarter of 2021.
It is worth mentioning here that Stanley Black, starting July 2021, will have the option to buy an 80% stake in MTD Holdings Inc. — manufacturer and provider of outdoor power equipment. It acquired 20% interest in MTD Holdings in January 2019.
Shareholders’ Rewards: Stanley Black believes in rewarding shareholders with dividend payouts and share buybacks. In first-quarter 2021, the company distributed dividends of $110.1 million to its shareholders, reflecting an increase of 4.3% from the comparable quarter a year ago. Notably, it announced a hike of 1.4% in its quarterly dividend rate in July last year.
In addition, the company repurchased shares worth $14.9 million in the first quarter, reflecting a year-over-year increase of 65.6%. In April 2021, its board of directors approved a program to repurchase 20 million shares. A healthy cash flow position will likely help it reward its shareholders.
Earnings Estimate Revisions: The company’s earnings estimates have increased in the past 60 days. Currently, the Zacks Consensus Estimate for earnings is pegged at $2.84 for the second quarter of 2021, reflecting an increase of 7.6% from the 60-day-ago figure.
Stanley Black & Decker, Inc. Price and Consensus
Stanley Black & Decker, Inc. price-consensus-chart | Stanley Black & Decker, Inc. Quote
Also, earnings estimates are pegged at $11.08 for 2021 and $11.99 for 2022, suggesting increases of 7.5% and 6.9% from the 60-day-ago figures, respectively.
Other Key Picks
Some other top-ranked stocks in the sector are Tennant Company TNC, Applied Industrial Technologies, Inc. AIT and Lincoln Electric Holdings, Inc. LECO. While Tennant currently sports a Zacks Rank #1 (Strong Buy), both Applied Industrial and Lincoln Electric carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, earnings estimates for the companies have improved for the current year. Further, earnings surprise for the last reported quarter was 82.81% for Tennant, 35.64% for Applied Industrial and 16.10% for Lincoln Electric.
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Stanley Black & Decker, Inc. (SWK) : Free Stock Analysis Report
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