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Stanley Black (SWK) to Sell Mechanical Security Operations
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Industrial tool maker Stanley Black & Decker, Inc. (SWK - Free Report) recently announced that it has agreed to sell a majority portion of its Mechanical Security businesses to dormakaba. The transaction proceeds will be approximately $725 million in cash.
Post the release of third-quarter 2016 results on Oct 27, shares of the company yielded 1.5% return, underperforming the return of 8.8% generated by the Zacks categorized Machine Tools & Related Products industry.
Despite the underperformance, we believe that this Zacks Rank #3 (Hold) stock has solid growth potential, backed by its strategy of shifting its business portfolio toward favored growth markets through organic and inorganic ways. In the near term, improved performance in the Tools & Storage segment and better profitability in the Security segment will boost the company’s financial performance.
Before discussing the divestment, a brief description of Stanley Black & Decker’s Security segment might be useful. The segment comprises Convergent Security Solutions and Mechanical Access Solutions businesses. The latter sells automatic doors, commercial hardware, locking mechanisms, electronic keyless entry systems, keying systems, tubular and mortise door locksets. In 2015, the Security business generated revenues of $2.1 billion, representing 19% of the company’s total revenues in the year.
Divestment Deal
Per Stanley Black & Decker’s signed definitive agreement, the to-be-divested assets include the commercial hardware brands, BEST Access, phi Precision and GMT. In the past twelve months, these assets generated revenues of $270 million and earnings before interest, tax, depreciation and amortization of $52 million.
Businesses not meant for sale including commercial electronic security and automatic doors, contributed approximately $1.8 billion in revenues in the last twelve months. Brands such as Sargent and Greenleaf were not included in the sale.
Subject to the fulfilment of customary closing conditions and regulatory approvals, Stanley Black & Decker anticipates the divestment to be completed in the first quarter of 2017.
The company expects that the deal will likely dilute earnings by roughly 20 cents per share in 2017. However, it anticipates the impact of this dilution to be more than offset by the accretion anticipated from the Newell Tools acquisition (expected to be completed in the first quarter), low-interest financing strategies and share buybacks. Netting the impacts, the company anticipates 5 cents earnings accretion in the year.
Though the initial impacts of the divestment seem unfavorable, we believe such dispositions are in sync with Stanley Black & Decker’s inorganic ways of strengthening its core businesses. The estimated after-tax cash proceeds of approximately $700 million from the deal can be utilized for boosting more attractive businesses in the company’s portfolio.
Stocks to Consider
Stanley Black & Decker has a market capitalization of $17.6 billion. Over the last 60 days, the Zacks Consensus Estimate for the stock has increased by 0.3% to $6.49 per share for 2016 while decreased by 1.3% to $6.99 per share for 2017.
Some better-ranked stocks in the machinery industry include Enersys Inc. (ENS - Free Report) , II-VI Incorporated and Applied Industrial Technologies, Inc. (AIT - Free Report) . While Enersys and II-VI Incorporated sport a Zacks Rank #1 (Strong Buy), Applied Industrial Technologies carries a Zacks Rank #2 (Buy). You can seethe complete list of today’s Zacks #1 Rank stocks here.
Enersys Inc’s earnings estimates for fiscal 2017 improved over the last 60 days. It has an average positive earnings surprise of 3.01% for the trailing four quarters.
II-VI Incorporated reported better-than-expected results in the last four quarters, with a positive average earnings surprise of 39.80%. Also, bottom-line expectations for fiscal 2017 and fiscal 2018 have improved over the past 60 days.
Applied Industrial Technologies’ earnings estimates for fiscal 2017 and fiscal 2018 have been revised upward over the last 60 days. Average earnings surprise for the last four quarters is a positive 4.93%.
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Today, you are invited to download the full list of 220 Zacks Rank #1 ""Strong Buy"" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 ""Strong Sells"" and other private research. See these stocks free >>
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Stanley Black (SWK) to Sell Mechanical Security Operations
Industrial tool maker Stanley Black & Decker, Inc. (SWK - Free Report) recently announced that it has agreed to sell a majority portion of its Mechanical Security businesses to dormakaba. The transaction proceeds will be approximately $725 million in cash.
Post the release of third-quarter 2016 results on Oct 27, shares of the company yielded 1.5% return, underperforming the return of 8.8% generated by the Zacks categorized Machine Tools & Related Products industry.
Despite the underperformance, we believe that this Zacks Rank #3 (Hold) stock has solid growth potential, backed by its strategy of shifting its business portfolio toward favored growth markets through organic and inorganic ways. In the near term, improved performance in the Tools & Storage segment and better profitability in the Security segment will boost the company’s financial performance.
Before discussing the divestment, a brief description of Stanley Black & Decker’s Security segment might be useful. The segment comprises Convergent Security Solutions and Mechanical Access Solutions businesses. The latter sells automatic doors, commercial hardware, locking mechanisms, electronic keyless entry systems, keying systems, tubular and mortise door locksets. In 2015, the Security business generated revenues of $2.1 billion, representing 19% of the company’s total revenues in the year.
Divestment Deal
Per Stanley Black & Decker’s signed definitive agreement, the to-be-divested assets include the commercial hardware brands, BEST Access, phi Precision and GMT. In the past twelve months, these assets generated revenues of $270 million and earnings before interest, tax, depreciation and amortization of $52 million.
Businesses not meant for sale including commercial electronic security and automatic doors, contributed approximately $1.8 billion in revenues in the last twelve months. Brands such as Sargent and Greenleaf were not included in the sale.
Subject to the fulfilment of customary closing conditions and regulatory approvals, Stanley Black & Decker anticipates the divestment to be completed in the first quarter of 2017.
The company expects that the deal will likely dilute earnings by roughly 20 cents per share in 2017. However, it anticipates the impact of this dilution to be more than offset by the accretion anticipated from the Newell Tools acquisition (expected to be completed in the first quarter), low-interest financing strategies and share buybacks. Netting the impacts, the company anticipates 5 cents earnings accretion in the year.
Though the initial impacts of the divestment seem unfavorable, we believe such dispositions are in sync with Stanley Black & Decker’s inorganic ways of strengthening its core businesses. The estimated after-tax cash proceeds of approximately $700 million from the deal can be utilized for boosting more attractive businesses in the company’s portfolio.
Stocks to Consider
Stanley Black & Decker has a market capitalization of $17.6 billion. Over the last 60 days, the Zacks Consensus Estimate for the stock has increased by 0.3% to $6.49 per share for 2016 while decreased by 1.3% to $6.99 per share for 2017.
STANLEY B&D INC Price and Consensus
STANLEY B&D INC Price and Consensus | STANLEY B&D INC Quote
Some better-ranked stocks in the machinery industry include Enersys Inc. (ENS - Free Report) , II-VI Incorporated and Applied Industrial Technologies, Inc. (AIT - Free Report) . While Enersys and II-VI Incorporated sport a Zacks Rank #1 (Strong Buy), Applied Industrial Technologies carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Enersys Inc’s earnings estimates for fiscal 2017 improved over the last 60 days. It has an average positive earnings surprise of 3.01% for the trailing four quarters.
II-VI Incorporated reported better-than-expected results in the last four quarters, with a positive average earnings surprise of 39.80%. Also, bottom-line expectations for fiscal 2017 and fiscal 2018 have improved over the past 60 days.
Applied Industrial Technologies’ earnings estimates for fiscal 2017 and fiscal 2018 have been revised upward over the last 60 days. Average earnings surprise for the last four quarters is a positive 4.93%.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 ""Strong Buy"" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 ""Strong Sells"" and other private research. See these stocks free >>