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Stanley Black (SWK) to Gain From Business Strength Amid Risks
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Stanley Black & Decker, Inc.’s (SWK - Free Report) cost-reduction program is expected to aid its bottom line and drive margin performance in the quarters ahead. It is making efforts to eliminate and reduce overlapping capabilities and functions. It is resizing operations to ensure that resources better serve core businesses. In the first nine months of 2023, it generated pre-tax run rate savings of $675 million from a global cost-reduction program. The company expects to generate run rate savings of $1 billion from this program in 2023.
SWK’s Industrial segment is poised to benefit from recovery in aerospace and auto end markets. However, it expects the divestiture of the oil and gas business to weigh on its industrial business revenues. For 2023, the firm suggests Industrial segment’s organic revenues to remain flat year over year.
Stanley Black has been divesting non-core operations to drive growth. In December 2023, it inked a deal to divest its STANLEY Infrastructure business to Epiroc AB for $760 million. The divestment will help the company to focus on its core businesses while supporting its capital-allocation priorities. SWK expects to use the cash proceeds of the transaction, net of modest taxes, to reduce its debt.
The company remains focused on rewarding its shareholders through dividend payments and share buybacks. In the first nine months of 2023, the firm paid dividends of $360.8 million, up 4.3% year over year. It also bought back shares worth $6.8 million. In July, SWK hiked its quarterly dividend by a penny to 81 cents per share.
Image Source: Zacks Investment Research
In the past three months, the Zacks Rank #3 (Hold) company gained 19.9% compared with the industry’s growth of 14.5%.
Despite the positives, lower consumer outdoor and DIY market demand is a drag on the Tools & Outdoor segment’s performance. Within the segment, the power tools business has been experiencing weaknesses due to reduced demand for consumer tools. The Outdoor business is also witnessing lower consumer demand. For 2023, the company expects segmental organic revenues to decline in the mid-to-high single digits.
Also, the low liquidity level remains a concern. At the end of third-quarter 2023, its cash and cash equivalents totaled $347.8 million, much lower than the current debt of $1,501 million. This implies that SWK does not have sufficient cash to meet its current debt obligations.
Crane delivered a trailing four-quarter average earnings surprise of 29.8%. In the past 60 days, the Zacks Consensus Estimate for CR’s 2023 earnings has remained unchanged. The stock has rallied 27.9% in the past three months.
Flowserve has a trailing four-quarter average earnings surprise of 27.3%. The consensus estimate for FLS’ 2023 earnings has increased 1% in the past 60 days. Shares of the company have risen 3.9% in the past three months.
Ferguson delivered a trailing four-quarter average earnings surprise of 4.7%. In the past 60 days, the consensus estimate for FERG’s 2023 earnings has improved 0.5%. The stock has risen 12.1% in the past three months.
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Stanley Black (SWK) to Gain From Business Strength Amid Risks
Stanley Black & Decker, Inc.’s (SWK - Free Report) cost-reduction program is expected to aid its bottom line and drive margin performance in the quarters ahead. It is making efforts to eliminate and reduce overlapping capabilities and functions. It is resizing operations to ensure that resources better serve core businesses. In the first nine months of 2023, it generated pre-tax run rate savings of $675 million from a global cost-reduction program. The company expects to generate run rate savings of $1 billion from this program in 2023.
SWK’s Industrial segment is poised to benefit from recovery in aerospace and auto end markets. However, it expects the divestiture of the oil and gas business to weigh on its industrial business revenues. For 2023, the firm suggests Industrial segment’s organic revenues to remain flat year over year.
Stanley Black has been divesting non-core operations to drive growth. In December 2023, it inked a deal to divest its STANLEY Infrastructure business to Epiroc AB for $760 million. The divestment will help the company to focus on its core businesses while supporting its capital-allocation priorities. SWK expects to use the cash proceeds of the transaction, net of modest taxes, to reduce its debt.
The company remains focused on rewarding its shareholders through dividend payments and share buybacks. In the first nine months of 2023, the firm paid dividends of $360.8 million, up 4.3% year over year. It also bought back shares worth $6.8 million. In July, SWK hiked its quarterly dividend by a penny to 81 cents per share.
Image Source: Zacks Investment Research
In the past three months, the Zacks Rank #3 (Hold) company gained 19.9% compared with the industry’s growth of 14.5%.
Despite the positives, lower consumer outdoor and DIY market demand is a drag on the Tools & Outdoor segment’s performance. Within the segment, the power tools business has been experiencing weaknesses due to reduced demand for consumer tools. The Outdoor business is also witnessing lower consumer demand. For 2023, the company expects segmental organic revenues to decline in the mid-to-high single digits.
Also, the low liquidity level remains a concern. At the end of third-quarter 2023, its cash and cash equivalents totaled $347.8 million, much lower than the current debt of $1,501 million. This implies that SWK does not have sufficient cash to meet its current debt obligations.
3 Promising Stocks
We have highlighted three better-ranked stocks from the Zacks Industrial Products sector, namely Crane Company (CR - Free Report) , Flowserve Corporation (FLS - Free Report) and Ferguson plc (FERG - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Crane delivered a trailing four-quarter average earnings surprise of 29.8%. In the past 60 days, the Zacks Consensus Estimate for CR’s 2023 earnings has remained unchanged. The stock has rallied 27.9% in the past three months.
Flowserve has a trailing four-quarter average earnings surprise of 27.3%. The consensus estimate for FLS’ 2023 earnings has increased 1% in the past 60 days. Shares of the company have risen 3.9% in the past three months.
Ferguson delivered a trailing four-quarter average earnings surprise of 4.7%. In the past 60 days, the consensus estimate for FERG’s 2023 earnings has improved 0.5%. The stock has risen 12.1% in the past three months.