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Stanley Black (SWK) to Purchase 80% Stake in MTD Holdings

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Stanley Black & Decker, Inc. SWK yesterday announced that it will buy an 80% stake in MTD Holdings Inc. for $1.6 billion in cash. The transaction will boost channel opportunities, strengthen innovation capabilities and boost product offerings for Stanley Black.

Notably, Stanley Black already owns a 20% stake in MTD Holdings, having acquired the interest for $234 million in cash in 2019. Stanley Black’s shares lost momentum yesterday, with shares falling 2.99% and ending the trading session at $194.50.

MTD Holdings is a well-known name in the outdoor space. It manufactures and sells walk-behind mowers, lawn tractors, residential robotic mowers, zero-turn mowers, handheld outdoor power equipment, snow blowers and garden tools. The products are mainly meant for use in professional and residential markets. The privately held company is headquartered in Valley City, OH, and operates facilities in Europe and North America.

Inside the Headlines

MTD Holdings’ trailing 12 months’ revenues total $2.5 billion and employee strength is approximately 7,500. Products offered are sold under popular brand names, including WOLF-Garten, Cub Cadet, Robomow, Troy-Bilt and Rover.

With the growing preferences for home and garden products as well as electrification, Stanley Black’s buyout of MTD Holdings will boost its opportunities in the outdoor products market, which is worth at least $25 billion. Brand popularity and valued employees are rewards.

Subject to the satisfaction of customary closing conditions and the receipt of regulatory approvals, Stanley Black expects to close the transaction in 2021. The transaction value of $1.6 billion will be funded through debts and available cash.

Stanley Black anticipates MTD Holdings to boost its adjusted earnings by 50 cents per share in 2022. The contribution is expected to increase to $1.00 per share by 2025. Also, cost synergies (cumulative) of $100 million are expected by 2025. Regarding charges, Stanley Black predicts incurring non-cash charges of $125-$150 million and restructuring, integration and other costs of $175-$200 million upon the completion of the transaction and subsequent three years.

Zacks Rank, Estimates and Price Performance

With a $32.7-billion market capitalization, Stanley Black currently carries a Zacks Rank #3 (Hold). It is poised to benefit from synergistic gains from acquired assets, a diversified business portfolio, and improving tools, storage and security businesses. However, commodity price inflation and impacts of divestitures on near-term results are concerning for the company.

In the past three months, the company’s shares have declined 6.8% compared with the industry’s fall of 1.8%.

Zacks Investment Research
Zacks Investment Research

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Meanwhile, the Zacks Consensus Estimate for its earnings is pegged at $11.55 for 2021 and $12.27 for 2022, reflecting growth of 3.6% and 1.1% from the respective 30-day-ago figures. Also, the estimate for the second quarter is pegged at $2.55, increasing 5.8% from the 30-day-ago figures.

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

Stocks to Consider

Some better-ranked stocks in the Zacks Industrial Products sector are Kadant Inc. KAI, Enerpac Tool Group Corp. EPAC and Lincoln Electric Holdings, Inc. LECO. While Kadant currently sports a Zacks Rank #1 (Strong Buy), both Enerpac Tool and Lincoln Electric carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 30 days, earnings estimates for Kadant and Lincoln Electric improved for the current year, while have been unchanged for Enerpac Tool. Further, the earnings surprise for the last reported quarter was 33.11% for Kadant, 64.71% for Enerpac Tool and 14.38% for Lincoln Electric.

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Stanley Black & Decker, Inc. (SWK) : Free Stock Analysis Report

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Enerpac Tool Group Corp. (EPAC) : Free Stock Analysis Report

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