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Stanley Black Provides Strategic Update at Investor Day

Zacks Equity Research

Stanley Black & Decker, Inc. SWK has provided a strategic update at its recently held Investor Day. It also reaffirmed guidance for 2019.

As part of its strategic update, Stanley Black & Decker aims to strengthen its diversified industrial business, and provided long-term financial targets. By 2022, the company aims to grow its total revenues roughly by 10−12% (CAGR), including organic sales growth of 4−6%. On a segmental basis, Industrial revenues will likely comprise 15−20%, Tools & Storage revenues with 50−60%, Lawn & Garden with 15-20% and Security revenues with 10% of total revenues.

Earnings per share are predicted to grow 10−12% or roughly 7−9% excluding acquisitions. Cash flow return on investments will be 12−15% while free cash flow will be greater than or equal to net income. In the years ahead, the company wishes to follow its 50/50 capital allocation strategy of acquisitions and reward shareholders.

In addition, the company has reaffirmed its guidance for 2019. Earnings are anticipated to be in a $8.50-$8.70 per share range. In addition, free cash flow conversion is predicted to be 85-90%.

Our Take

Stanley Black & Decker’s market expansion strategies are expected to be key growth drivers, going forward. In this regard, brands like Newell Tools have been strengthening the company’s tools business through deeper penetration into markets worldwide. In addition, the buyout of industrial business of Nelson Fastener Systems (April 2018) has been strengthening its Engineered Fastening business, and will be accretive to earnings.

Over the past six months, the Zacks Rank #3 (Hold) company has yielded a return of 7.3%, outperforming 2.1% growth recorded by the industry.

However, the company is currently dealing with adverse impact of rising cost of sales, primarily due to commodity inflation, unfavorable impact of foreign currency movements and tariffs.

Key Picks

Some better-ranked stocks from Zacks Industrial Products sector are Harsco Corporation HSC, Dover Corporation DOV and Actuant Corporation ATU. While Harsco sports a Zacks Rank #1 (Strong Buy), Dover and Actuant carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Harsco exceeded estimates in each of the preceding four quarters, the average positive earnings surprise being 11.40%.

Dover surpassed estimates in each of the trailing four quarters, the average positive earnings surprise being 8.61%.

Actuant exceeded estimates in each of the preceding four quarters, the average positive earnings surprise being 11.01%.

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