Tools & Outdoor Weakness Hurt Stanley Black's (SWK) Sales in Q3
Stanley Black & Decker, Inc. SWK reported third-quarter 2023 adjusted earnings (excluding $1.02 from non-recurring items) of $1.05 per share, which beat the Zacks Consensus Estimate of 84 cents. The bottom line jumped 38.2% year over year due to lower costs.
Stanley Black’s net sales of $3,953.9 million missed the Zacks Consensus Estimate of $4,019.3 million. The top line also declined 4% year over year due to weakness in the Tools & Outdoor segment.
Segmental Discussion
Revenues from SWK’s primary segment, Tools & Outdoor, totaled $3,355.3 million, down approximately 4% year over year. Lower consumer outdoor and DIY market demand weighed on segmental revenues. Our estimate for segmental revenues was $3,387.7 million.
The Tools & Outdoor unit manufactures and markets power tools for professional, consumer tools, hand tools, storage systems, pneumatic tools and fasteners. The segment has been grappling with lower volumes due to reduced retail and consumer demand. In the first nine months of 2023, the segment’s revenues declined 7.5% year over year.
Stanley Black & Decker, Inc. Price, Consensus and EPS Surprise
Stanley Black & Decker, Inc. price-consensus-eps-surprise-chart | Stanley Black & Decker, Inc. Quote
Revenues from the Industrial segment grossed $598.6 million, down 4.2% year over year. The Oil & Gas divestiture and lower volumes hurt segmental revenues. Our estimate for segmental revenues was $609.7 million.
Margin Profile
In the reported quarter, Stanley Black’s cost of sales decreased 6.7% year over year to $2,893.3 million. The gross profit increased 4.2% to $1,060.6 million. The gross margin increased 210 basis points (bps) to 26.8%.
Selling, general and administrative expenses dipped around 1% year over year to $794.3 million. Operating profit was $266.3 million in the quarter compared with $218.3 million reported in the year-ago quarter. The margin increased 140 bps to 6.7%.
Balance Sheet and Cash Flow
While exiting the third quarter, Stanley Black had cash and cash equivalents of $347.8 million compared with $395.6 million reported at the end of fourth-quarter 2022. The long-term debt balance was $6,099.2 million, higher than $5,352.9 million reported at the end of fourth-quarter 2022.
In the first nine months of 2023, net cash provided by operating activities was $422 million compared with $2,110.6 million cash used in the year-ago period. Capital and software expenditures totaled $216.4 million, down from $399.9 million reported in the year-ago period. Free cash flow (before dividends) in the year was $205.6 million compared with $2,510.5 million free cash outflow a year ago.
In the first nine months of 2023, SWK paid out dividends worth $360.8 million to its shareholders, up 4.3% from the year-ago period.
2023 Guidance
For 2023, Stanley Black expects adjusted earnings of $1.10-$1.40 per share compared with earnings of 70 cents-$1.30 anticipated earlier. The mid-point of the guided range — $1 — lies below the Zacks Consensus Estimate of $1.04.
Stanley Black, carrying a Zacks Rank #2 (Buy), continues to expect free cash flow of $0.6-$0.9 billion for 2023. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks.
Performance of Some Other Companies
Below, we discuss the performance of some companies that have recently reported earnings.
General Electric Company GE reported third-quarter 2023 adjusted earnings of 82 cents per share, which beat the Zacks Consensus Estimate of 56 cents. The bottom line jumped more than 100% year over year.
General Electric’s total revenues of $17,346 million beat the consensus estimate of $15,675 million. The top line increased 19.9% year over year.
3M Company MMM reported third-quarter 2023 adjusted earnings of $2.68 per share, which surpassed the Zacks Consensus Estimate of $2.34.
3M’s net sales of $8,312 million outperformed the Zacks Consensus Estimate of $7,952.7 million. However, the top line declined 3.6% year over year due to a 3.7% decrease in organic sales.
Danaher Corporation’s DHR third-quarter 2023 adjusted earnings of $2.02 per share surpassed the Zacks Consensus Estimate of $1.83. However, the bottom line declined 21.1% year over year.
Danaher’s net sales of $6,873 million outperformed the consensus estimate of $6,611.7 million. However, it declined 10.3% year over year due to a decrease in the sale of COVID-related products and weak demand in the Life Sciences segment.
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