SWK Beats 4Q Est by a Cent
Industrial tool maker Stanley Black & Decker (SWK) reported earnings per share from continuing operations of $1.37 in the fourth quarter of 2012, up from $1.22 reported in the year-ago quarter and a cent above the Zacks Consensus Estimate of $1.36.
Earnings per share for 2012 increased 1.3% to $4.67 but fell behind the Zacks Consensus Estimate of $4.92 per share.
GAAP EPS, including 58 cents and $1.97 of one-time charges, was 79 cents for the fourth quarter and $2.70 for 2012.
Stanley Black & Decker, in Dec 2012, divested its Hardware & Home Improvement business (:HHI), which majorly belonged to the company’s Security segment; only a part of it was included in the CDIY segment. Since divested, the results from this business have been recorded as discontinued operations.
Revenue
Net revenue in the fourth quarter increased 4.0% year over year to $2,668.5 million. The increase can be attributed to a 3% contribution from acquisitions and 4% from volume growth. The impact was partially offset by a 1% negative impact from foreign currency translation.
Revenue in the CDIY segment (51.4% of fourth quarter 2012 revenue) increased 8.3% year over year to $1,371.7 million, while the Security segment (24.2%) reported revenues of $646.5 million, reflecting a year over year decline of 1.7%. Industrial segment (24.4%) sales increased 1.5% to $650.3 million.
For 2012, net revenues came in at $10,190.5 million, up 8.0% year over year.
Margins
In the fourth quarter 2012, normalized cost of sales, as a percentage of revenue was 64.0% versus 64.3% reported in the year-ago quarter. Gross margin improved 30 basis points to 36.0% being benefited from cost synergies and margin improvement initiatives of the company.
Selling, general and administrative expenses registered a year-over-year increase of 1.2% and as a percentage of revenue declined 60 basis points to 22.6%. Operating margin in the quarter was 13.3% versus 12.5% in the year-ago comparable quarter.
Balance Sheet
Exiting the fourth quarter, Stanley Black & Decker’s cash and cash equivalents stood at $716.0 million, down roughly 7.0% from $769.5 million in the previous quarter. Long-term debt (net of current portions) rose 29.2% sequentially to $3,526.5 million.
Cash Flow
Normalized net cash flow from operating activities was $692.4 million in the fourth quarter, up 14% year over year. Capital spending increased a whopping 78.6% to $96.1 million. Higher cash flow and increased capital spending resulted in a 7.7% increase in free cash flow that settled at $596.3 million.
The company expended approximately $82.7 million in paying dividends to shareholders in the fourth quarter.
For 2012, cash flow from operating activities settled at $1,322.7 million while capital spending approximated $263.6 million, resulting in free cash flow of $1,059.1 million.
Outlook
For 2013, management anticipates earnings per share, excluding one-time charges, to be within the $5.40-$5.65 range. Organic net sales are expected to grow 2%-3% from the 2012 level.
Cost synergies of approximately $85 million, including the final amount of $50 million from the Black & Decker and $35 million from the Niscayah acquisitions are expected to be realized in 2013.
GAAP EPS for the year is expected to be in the range of $4.62-$4.87 for 2013. Free cash flow is projected to be roughly $1.0 billion.
Stanley Black & Decker manufactures tools and engineered security solutions across the globe. The stock currently carries a Zacks Rank #4 (Sell). Other companies to watch out for earnings are Lincoln Electric Holdings Inc. (LECO)—expected to report on Feb 11, 2013; Danaher Corp. (DHR)—expected to report on Jan 29, 2013; and Hardinge Inc. (HDNG)—expected to release on Feb 11, 2013.
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