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Stanley Black & Decker Beats on Q2 Earnings, Raises Outlook

Zacks Equity Research

Industrial tool maker, Stanley Black & Decker, Inc. (SWK), reported earnings from continuing operations of $1.43 per share in second-quarter 2014. The bottom-line result grew 17.2% year over year, surpassing the Zacks Consensus Estimate of $1.37.

GAAP earnings per share were $1.37, including about 6 cents per share of merger and acquisitions-related charges.

Stanley Black & Decker, Inc - Earnings Surprise | FindTheBest


Stanley Black & Decker generated net revenues of $2,885.5 million, up nearly 1% year over year, but below the Zacks Consensus Estimate of $2,939 million. The year-over-year result benefited from 1% positive price impact.

Stanley Black & Decker reports its revenues under three heads, a brief discussion of which is provided below:

Revenues from the Construction & Do-It-Yourself segment (48.3% of second-quarter revenues) inched up 0.1% to $1,394.6 million. The Security segment (20.9%) reported revenues of $601.7 million, down 0.4% year over year. The Industrial segment’s (30.8%) sales advanced 3.2% to $889.2 million.


Normalized cost of sales, as a percentage of revenue, was at 63.5% versus 64.5% recorded in the year-ago quarter. Gross margin increased 100 basis points (bps) to 36.5%. Selling, general and administrative expenses edged up 0.7% year over year, while as a percentage of revenue, it decreased 10 basis points to 22.8%. Operating margin was up 110 basis points to 13.7%.

Balance Sheet

Exiting second-quarter 2014, Stanley Black & Decker’s cash and cash equivalents increased 19.2% sequentially to $515.7 million from $432.6 million. Long-term debt (net of current portions) recorded a meager increase of 0.5% to $3,849.3 million.

Cash Flow

Stanley Black & Decker generated a cash flow of $437.2 million from its operating activities, up 137.4% year over year. Capital and software expenditures totaled $61.4 million, down 23.4% from $80 million spent in the year-ago quarter.

Normalized free cash flow was $410.6 million versus $226.3 million in the year-ago quarter. During the quarter, the company paid approximately $78.4 million in dividends.


Stanley Black & Decker raised its 2014 guidance. Presently, earnings per share, excluding one-time charges, are predicted in the $5.50−$5.60 range as against the previous projection of $5.35−$5.50. The revision can be attributed to expectations of strong performance in the Industrial segment and strict cost-control measures. These positives will somewhat mitigate the negative impact of lower organic growth during the year.

GAAP earnings for 2014 are expected in the range of $5.38−$5.48 per share versus $5.23−$5.38 expected earlier. Free cash flow is projected to be at least $675 million. Stanley Black & Decker also intends to reward its shareholders through dividend payments, debt reduction and share buybacks.

With a market capitalization of $13.3 billion, Stanley Black & Decker currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include NN Inc. (NNBR), Blount International Inc. (BLT) and MRC Global Inc. (MRC). While NN Inc. and Blount International sport a Zacks Rank #1 (Strong Buy), MRC Global holds a Zacks Rank #2 (Buy).

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