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Stanley Black & Decker (SWK) to Post Q2 Earnings: What's Up?

Zacks Equity Research

Stanley Black & Decker, Inc. SWK is slated to report second-quarter 2019 results on Jul 23, before the market opens.

The company delivered better-than-expected results in three of the last four quarters while recorded in-line results once. Average earnings surprise was a positive 14.67%. In the last reported quarter, its earnings of $1.42 surpassed the Zacks Consensus Estimate of $1.10.

In the last three months, shares of the company edged down 2% compared with the industry’s decline of 4.2%.


Let us see how things are shaping up for Stanley Black & Decker this quarter.

Factors Likely to Influence Q2 Results

The company has a solid product portfolio, with demand growing for Craftsman, Lenox, Irwin and DeWalt FlexVolt products. This, along with innovation of products, business expansion in international arenas and share buyback activities, has been benefiting Stanley Black & Decker in the past quarters and must have added value in the second quarter as well. Likewise, its e-commerce business, cost-saving actions and acquired assets might have supported revenue growth in the quarter.

On the flip side, tariff woes, unfavorable movements in foreign currencies and commodity inflation (net of positive impacts of pricing) remain concerning. Gross margin in the first quarter of the year suffered due to these external headwinds. We believe that similar picture is quite likely for the second quarter as the company predicts that it will witness adverse impact of $340 million from these headwinds in the year.

In addition to these company-specific factors, we believe that industrial tool makers are gaining from infrastructure investments, use of sophisticated technologies in manufacturing process, favorable policy changes in the country, and new construction and remodeling activities. However, slower pace of growth in industrial production might be concerning.

In the second quarter of 2019, earnings per share for the company are predicted to be roughly 29.5% of the year’s guidance. Adjusted earnings for the year are anticipated to be $8.50-$8.70 per share.

For the Tools & Storage segment, Stanley Black & Decker anticipates organic revenues to grow in a mid-single digit for 2019. Growth prospects are strong for this segment. The Zacks Consensus Estimate for the segment’s revenues for the second quarter is pegged at $2,675 million, suggesting growth of 4.2% from the year-ago reported figure. Segmental profits might suffer from adverse impacts of external headwinds.

For the Industrial segment, the company expects organic sales to decline modestly in 2019. Results might suffer from softness in the automotive end market while benefits from acquired assets will be advantageous. Further, transformational activities will likely influence the Security segment’s results, with organic sales growth likely to be in a low-single digit.

For the second quarter of 2019, the Zacks Consensus Estimate for Industrial revenues is pegged at $646 million, indicating 12.7% growth from the year-ago figure. Moreover, the Zacks Consensus Estimate for Security revenues is pegged at $493 million, suggesting a decline of 2% from the year-ago quarter’s reported figure and growth of 1.4% from the previous quarter.

Earnings Whispers

Our proven model provides some idea on stocks that are about to release their earnings results. Per the model, a stock needs a combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for a likely earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The case with Stanley Black & Decker has been provided below.

Earnings ESP: The company has an Earnings ESP of -0.31%, with the Most Accurate Estimate of $2.54 below the Zacks Consensus Estimate of $2.55.

Stanley Black & Decker, Inc. Price, Consensus and EPS Surprise

 

Stanley Black & Decker, Inc. Price, Consensus and EPS Surprise

Stanley Black & Decker, Inc. price-consensus-eps-surprise-chart | Stanley Black & Decker, Inc. Quote

Zacks Rank: Stanley Black & Decker currently carries a Zacks Rank #3. This rank combined with negative ESP makes earnings prediction difficult.
 
Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revision momentum.

Stocks to Consider

Here are some companies in the Zacks Industrial Products sector that you may want to consider as according to our model these have the right combination of elements to post an earnings beat this quarter.

John Bean Technologies, Inc. JBT presently has an Earnings ESP of +2.33% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Chart Industries, Inc. GTLS has an Earnings ESP of +3.28% and a Zacks Rank #2 at present.

Axon Enterprise, Inc. AAXN currently has an Earnings ESP of +10.96% and a Zacks Rank #3.

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