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Stanley Black & Decker (SWK) Tops Q2 Earnings, View Up
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Industrial tool maker Stanley Black & Decker (SWK - Free Report) kept its earnings streak alive in second-quarter 2016. The company’s earnings from continuing operations were $1.84 per share or $1.89 per share, excluding restructuring charges. The results came in above the Zacks Consensus Estimate of $1.71 per share. Also, the bottom line exceeded the year-ago tally of $1.54.
The year-over-year increase was driven by operational efficiency and lower share count, more than offsetting the adverse impact of currency headwinds.
Talking of Stanley Black & Decker’s top-line results, revenues in the quarter totaled $2.932 billion, above the Zacks Consensus Estimate of $2.89 billion. Also, the top line increased 2.3% year over year on the back of 3% and 1% positive impacts of volume and pricing respectively, partially offset by a 2% adverse impact of unfavourable currency movements.
Segmental Detail
Stanley Black & Decker reports revenue under three market segments. A brief discussion on the segment’s quarterly results is provided below:
Tools & Storage generated revenues of $1,931.6 million, up 5% year over year and represented 65.9% of net revenue in the quarter. Organic revenue grew 8%, while forex losses had a 3% negative impact.
Industrial segment’s revenues, accounting for roughly 15.8% of net revenue, came in at $463.1 million, down 6.3% year over year. The fall was triggered by volume decline of 6%.
Revenues from Security, roughly 18.3% of net revenue, increased 0.8% year over year to $537.7 million. Favorable price impact of 1% and acquisition gains of 1% were partially offset by 1% negative impact of forex losses.
Margins
In the quarter, Stanley Black & Decker’s margin profile improved as revenue growth of 2.3% was complimented by 0.3% fall in cost of sales. Gross margin increased 160 basis points (bps) to 38.5%. Selling, general and administrative expenses grew 3.5% year over year while, as a percentage of revenues, it inched up 20 bps to 22.7%.
Balance Sheet & Cash Flow
Exiting second-quarter 2016, Stanley Black & Decker had cash and cash equivalents of $568.2 million, up compared with $352.2 million in the preceding quarter. Long-term debt (net of current portions) edged down 0.1% sequentially to $3,814.1 million.
In the quarter, the company generated net cash of $496.4 million from its operating activities, compared with $312.6 million generated in the year-ago quarter. Capital spending grew 19.8% year over year to $78.7 million. Normalized free cash flow was $417.7 million compared with $246.9 million recorded in the year-ago quarter.
During the quarter, Stanley Black & Decker paid cash dividends of approximately $79.8 million, and repurchased shares worth $0.74 million.
News Worth Considering
CEO’s Departure: Concurrent with the second quarter results release, Stanley Black & Decker’s board of directors announced its CEO, Mr. Lundgren’s retirement, effective Jul 31, 2016. He will be replaced by James M. Loree.
Dividend: On Jul 21, Stanley Black & Decker announced that its board of directors has approved 3 cents per share increase in the quarterly dividend. The new rate of 58 cents will be paid on Sep 20 to shareholders of record as on Sep 2.
Outlook: For 2016, Stanley Black & Decker increased its earnings per share guidance to $6.30−$6.50 per share from $6.20−$6.40 projected earlier.
Organic revenue growth is expected to be roughly 4% from 3−4% range anticipated earlier. The revised forecast is driven by improved Tools & Storage business and benefits from cost and productivity actions, partially offset by higher currency headwinds, weak industrial activities and other incremental costs.
Free cash flow conversion is predicted to be 100%.
With a market capitalization of $17.3 billion, Stanley Black & Decker currently carries a Zacks Rank #3 (Hold). Some other stocks in the machinery industry are performing well and hence, have gained high investment value. These include Nordson Corporation (NDSN - Free Report) , Ingersoll-Rand Plc (IR - Free Report) and Luxfer Holdings PLC (LXFR - Free Report) . While Nordson Corporation sports a Zacks Rank #1 (Strong Buy), both Ingersoll-Rand and Luxfer Holdings carry a Zacks Rank #2 (Buy).
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Stanley Black & Decker (SWK) Tops Q2 Earnings, View Up
Industrial tool maker Stanley Black & Decker (SWK - Free Report) kept its earnings streak alive in second-quarter 2016. The company’s earnings from continuing operations were $1.84 per share or $1.89 per share, excluding restructuring charges. The results came in above the Zacks Consensus Estimate of $1.71 per share. Also, the bottom line exceeded the year-ago tally of $1.54.
The year-over-year increase was driven by operational efficiency and lower share count, more than offsetting the adverse impact of currency headwinds.
Talking of Stanley Black & Decker’s top-line results, revenues in the quarter totaled $2.932 billion, above the Zacks Consensus Estimate of $2.89 billion. Also, the top line increased 2.3% year over year on the back of 3% and 1% positive impacts of volume and pricing respectively, partially offset by a 2% adverse impact of unfavourable currency movements.
Segmental Detail
Stanley Black & Decker reports revenue under three market segments. A brief discussion on the segment’s quarterly results is provided below:
Tools & Storage generated revenues of $1,931.6 million, up 5% year over year and represented 65.9% of net revenue in the quarter. Organic revenue grew 8%, while forex losses had a 3% negative impact.
Industrial segment’s revenues, accounting for roughly 15.8% of net revenue, came in at $463.1 million, down 6.3% year over year. The fall was triggered by volume decline of 6%.
Revenues from Security, roughly 18.3% of net revenue, increased 0.8% year over year to $537.7 million. Favorable price impact of 1% and acquisition gains of 1% were partially offset by 1% negative impact of forex losses.
Margins
In the quarter, Stanley Black & Decker’s margin profile improved as revenue growth of 2.3% was complimented by 0.3% fall in cost of sales. Gross margin increased 160 basis points (bps) to 38.5%. Selling, general and administrative expenses grew 3.5% year over year while, as a percentage of revenues, it inched up 20 bps to 22.7%.
Balance Sheet & Cash Flow
Exiting second-quarter 2016, Stanley Black & Decker had cash and cash equivalents of $568.2 million, up compared with $352.2 million in the preceding quarter. Long-term debt (net of current portions) edged down 0.1% sequentially to $3,814.1 million.
In the quarter, the company generated net cash of $496.4 million from its operating activities, compared with $312.6 million generated in the year-ago quarter. Capital spending grew 19.8% year over year to $78.7 million. Normalized free cash flow was $417.7 million compared with $246.9 million recorded in the year-ago quarter.
During the quarter, Stanley Black & Decker paid cash dividends of approximately $79.8 million, and repurchased shares worth $0.74 million.
News Worth Considering
CEO’s Departure: Concurrent with the second quarter results release, Stanley Black & Decker’s board of directors announced its CEO, Mr. Lundgren’s retirement, effective Jul 31, 2016. He will be replaced by James M. Loree.
Dividend: On Jul 21, Stanley Black & Decker announced that its board of directors has approved 3 cents per share increase in the quarterly dividend. The new rate of 58 cents will be paid on Sep 20 to shareholders of record as on Sep 2.
Outlook: For 2016, Stanley Black & Decker increased its earnings per share guidance to $6.30−$6.50 per share from $6.20−$6.40 projected earlier.
Organic revenue growth is expected to be roughly 4% from 3−4% range anticipated earlier. The revised forecast is driven by improved Tools & Storage business and benefits from cost and productivity actions, partially offset by higher currency headwinds, weak industrial activities and other incremental costs.
Free cash flow conversion is predicted to be 100%.
STANLEY B&D INC Price, Consensus and EPS Surprise
STANLEY B&D INC Price, Consensus and EPS Surprise | STANLEY B&D INC Quote
Zacks Rank & Stocks to Consider
With a market capitalization of $17.3 billion, Stanley Black & Decker currently carries a Zacks Rank #3 (Hold). Some other stocks in the machinery industry are performing well and hence, have gained high investment value. These include Nordson Corporation (NDSN - Free Report) , Ingersoll-Rand Plc (IR - Free Report) and Luxfer Holdings PLC (LXFR - Free Report) . While Nordson Corporation sports a Zacks Rank #1 (Strong Buy), both Ingersoll-Rand and Luxfer Holdings carry a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>