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Stanley Black Shares Gain 23% in 3 Months: What's Driving It?

Zacks Equity Research
·4 min read

Shares of Stanley Black & Decker, Inc. SWK have gained notably in the past three months. Tailwinds supporting top-line growth, cost-reduction measures and sound shareholder-friendly policies — evident from a hike in the dividend rate amid the pandemic — seem to have boosted sentiments for the stock.

The New Britain, CT-based company belongs to the Zacks Manufacturing – Tools & Related Products industry. The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past three months, the company’s shares have gained 22.6% against the industry’s growth of 1.5%. Notably, the S&P 500 has risen 8.2% and the sector has grown 15.1% during the same period.



 

Factors Influencing the Stock

In the past three months, Stanley Black has reported results for second-quarter 2020, with an earnings surprise of 26%. Also, sales in the quarter surpassed estimates by 3.8%. For 2020, the company kept its financial projections suspended due to the pandemic-related worries.

Despite the prevalence of pandemic woes, multiple factors seem to be creating a healthy operating environment for manufacturing companies like Stanley Black. Manufacturing activities are reviving gradually — as evident from increasing manufacturing output (1% monthly gain recorded in August as compared with a 16.1% fall in April) and rising ISM Purchasing Managers' Index (from 41.5% in April to 56% in August). In addition to improving manufacturing activities, the overall revival in the country’s stock market might have supported the company’s price improvement.

Also, Stanley Black’s cost-reduction measures are expected to help it tide over the pandemic-related financial difficulties. Notably, it anticipates realizing $1 billion in savings (including $500 million in 2020) from its cost actions taken in the past few months. Further, cost measures taken in October 2019 are likely to generate $180 million savings in 2020. Further, solid product offerings, a surge in the e-commerce business, innovation efforts, synergistic gains from buyouts and rising demand for do-it-yourself as well as health and security-related products are other tailwinds that are expected to have contributed to the share price increase.

Moreover, the company’s board of directors’ decision to hike the quarterly dividend rate by 1.4% or one cent per share reflects its commitment toward rewarding shareholders handsomely. The July-decision has significance as the hike was announced amid the pandemic.

Currently, the Zacks Consensus Estimate for the company’s earnings is pegged at $7.68 for 2020 and $8.68 for 2021, marking an increase of 29.3% and 16.8% from the respective 60-day-ago figures. Notably, eight upward revisions in earnings estimates were recorded for 2020 and seven for 2021. There was one downward revision each for 2020 and 2021.

Also, earnings estimates for the third quarter have improved from $1.75 to $2.53 in the past 60 days. Such an upward revision in earnings estimates is reflective of improving operating conditions for the company.

Stanley Black Decker, Inc. Price and Consensus

 

Stanley Black  Decker, Inc. Price and Consensus
Stanley Black Decker, Inc. Price and Consensus

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

Stanley Black’s Performance Versus Industry Players

The company outperformed three companies in the industry — including Kennametal Inc. KMT, Lincoln Electric Holdings, Inc. LECO and Enerpac Tool Group Corp. EPAC — in the past three months. During the period, Kennametal, Lincoln Electric and Enerpac Tool’s shares have gained 16.8%, 11.8% and 21.5%, respectively.

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