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Will Stanley Black (SWK) Keep Its Earnings Streak Alive in Q4?

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Zacks Equity Research
·5 min read
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Stanley Black & Decker, Inc. SWK is slated to report fourth-quarter 2020 results on Jan 28, before market open.

The company delivered better-than-expected results in the last four quarters, with an earnings surprise of 10.34%, on average. Notably, its third-quarter 2020 earnings of $2.89 per share surpassed the Zacks Consensus Estimate of $2.67.

In the past three months, shares of the company gained 1.3% compared with the industry’s growth of 5.3%.




 

Let us delve deeper.

Key Factors & Estimates for Q4

As disclosed by Stanley Black in December, results in the fourth quarter are likely to reflect the positive impacts of healthy demand for products. The Industrial segment is anticipated to have gained from an impressive demand for engineered fastening and attachment tools in the quarter. Likewise, strengthening retail POS in the United States as well as flourishing businesses in emerging markets, Europe and North America is expected to have boosted the Tools & Storage segment’s performance.    

In addition, innovation of products and surge in e-commerce businesses as well as healthy demand for security, health and do-it-yourself products are expected to have aided the top-line performance in the quarter. Synergistic benefits from acquired assets are also expected to have aided. Notably, buyouts boosted the company’s sales by 2% in the second and third quarters of 2020.

On the broader aspect, manufacturing players like Stanley Black are expected to have benefitted from healthy operating conditions in the country in the fourth quarter. Key indicators are manufacturing output, rising 11.2% in the fourth quarter, and ISM Purchasing Managers' Index, increasing from 55.4% in September to 60.7% in December.

The toolmaker also increased its scenario-planning assumption for organic sales growth in the fourth quarter of 2020 from 3-5% (communicated in October) to 10%.

The Zacks Consensus Estimate for revenues is pegged at $4,122 million in the fourth quarter, suggesting an 11% increase from the year-ago quarter’s reported number and 7.1% growth from the last reported quarter’s reported figure.

For the Security segment, the Zack Consensus Estimate for fourth-quarter sales is pegged at $493 million, indicating a 2.8% decrease from the year-ago reported figure and 7.2% growth sequentially. Further, sales estimates for the Industrial segment are pegged at $608 million. This suggests growth of 1.8% from the year-ago reported number and a 3.6% increase from the previous quarter’s reported figure. Likewise, the estimate for the Tools & Storage segment’s revenues is pegged at $2,951 million, indicating a 13.1% increase from the year-ago reported figure and 5.2% growth sequentially.

On the flip side, uncertainties and woes associated with the pandemic as well as headwinds related to foreign currency translation and tariffs are expected to have hurt the company’s performance in the fourth quarter. It is worth noting here that cost savings from measures introduced in April 2020 are expected to fetch $150 million in savings in the quarter. Other cost-savings actions are also likely to have aided.

The Zack Consensus Estimate for the company’s fourth-quarter earnings is pegged at $2.98, indicating an increase of 36.7% from the year-ago reported figure and 3.1% from the previous quarter.

Earnings Whispers

Our proven model suggests an earnings beat for Stanley Black this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. The case with Stanley Black & Decker is shown below. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Stanley Black has an Earnings ESP of +0.72%, with the Most Accurate Estimate of $3.00 above the Zacks Consensus Estimate of $2.98.

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

 

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: The company currently sports a Zacks Rank #3.

Other Stocks to Consider

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

AGCO Corporation AGCO currently has an Earnings ESP of +3.34% and is a Zacks #1 Ranked player. You can see the complete list of today’s Zacks #1 Rank stocks here.

Kennametal Inc. KMT presently has an Earnings ESP of +63.64% and a Zacks Rank of 2.

Dover Corporation DOV currently has an Earnings ESP of +5.55% and a Zacks Rank #2.

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