Industrial tool maker Stanley Black & Decker Inc. (SWK - Free Report) kept its earnings streak alive in third-quarter 2017, pulling off a positive earnings surprise of 4.3%. Results were primarily driven by organic sales growth, benefits from acquired assets and improved margins.
Earnings, excluding acquisition related charges and others, came in at $1.95 per share, surpassing the Zacks Consensus Estimate of $1.87. It also exceeded the year-ago quarter tally of $1.68 by 16.1%.
Organic and Acquisition Gains Drive Revenues
The quarter’s net sales were $3,298.6 million, increasing 14.5% from the year-ago tally. The performance was driven by 7% volume gains, 1% positive currency impact and 9% gain from acquired assets, partially offset by 3% adverse impact from divested assets.
Also, the top line exceeded the Zacks Consensus Estimate of $3.16 billion by 4.3%.
Stanley Black & Decker reports revenues under three market segments. A brief discussion on the quarterly results is provided below:
Tools & Storage’s revenues totaled $2,318.2 million, representing 70.3% of net revenues in the quarter. On a year-over-year basis, the segment’s revenues grew 22.2% on the back of 9% gain from volume growth, 13% from acquired assets and 1% from currency movements. These positives were partially offset by 1% negative impact from divestitures.
Industrial generated revenues of $503.6 million, accounting for roughly 15.3% of net revenues in the quarter. Sales grew 8.9% year over year primarily driven 8% and 1% benefit from volume growth and favorable currency movements, respectively.
Revenues from Security, roughly 14.5% of net revenues, decreased 8.8% year over year to $476.8 million. Favorable currency impact of 2% and acquisition gain of 3% were more than offset by 14% negative impact of divestitures.
Margin Profile Improves
In the quarter, Stanley Black & Decker’s cost of sales increased 13.8% year over year, accounting for 61.8% of quarter’s net sales versus 62.4% in the year-ago quarter. Gross margin grew 60 basis points (bps) to 38.2% as benefits from volume growth and improved productivity offset the negative impact of commodity inflation.
Selling, general and administrative expenses increased 17.1% year over year while as a percentage of revenues, it grew 50 bps to 22.9%.
Balance Sheet & Cash Flow
Exiting the third quarter, Stanley Black & Decker had cash and cash equivalents of $483.3 million, down from $539.5 million in the previous quarter. Long-term debt (net of current portions) was roughly flat at $3,818 million.
In the quarter, the company generated net cash of $356.9 million from its operating activities, increasing 44.7% year over year. Capital spending totaled $91 million versus $78.1 million in the year-ago quarter. Free cash flow improved to $265.9 million compared with $168.6 million in the year-ago quarter.
During the quarter, the company paid cash dividends of approximately $94.7 million and repurchased shares worth $0.6 million.
Outlook
For 2017, Stanley Black & Decker increased its earnings forecast to $7.33-$7.43 per share from the previous projection of $7.18-$7.38, primarily on the back of benefits accrued from higher organic revenue growth (of roughly 6%), operational excellence and acquired assets. The revised guidance represents year-over-year growth of 13-14%.
Free cash flow conversion is predicted to be 100%.
Stanley Black & Decker, Inc. Price and Consensus
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Industrial tool maker Stanley Black & Decker Inc. (SWK - Free Report) kept its earnings streak alive in third-quarter 2017, pulling off a positive earnings surprise of 4.3%. Results were primarily driven by organic sales growth, benefits from acquired assets and improved margins.
Earnings, excluding acquisition related charges and others, came in at $1.95 per share, surpassing the Zacks Consensus Estimate of $1.87. It also exceeded the year-ago quarter tally of $1.68 by 16.1%.
Organic and Acquisition Gains Drive Revenues
The quarter’s net sales were $3,298.6 million, increasing 14.5% from the year-ago tally. The performance was driven by 7% volume gains, 1% positive currency impact and 9% gain from acquired assets, partially offset by 3% adverse impact from divested assets.
Also, the top line exceeded the Zacks Consensus Estimate of $3.16 billion by 4.3%.
Stanley Black & Decker reports revenues under three market segments. A brief discussion on the quarterly results is provided below:
Tools & Storage’s revenues totaled $2,318.2 million, representing 70.3% of net revenues in the quarter. On a year-over-year basis, the segment’s revenues grew 22.2% on the back of 9% gain from volume growth, 13% from acquired assets and 1% from currency movements. These positives were partially offset by 1% negative impact from divestitures.
Industrial generated revenues of $503.6 million, accounting for roughly 15.3% of net revenues in the quarter. Sales grew 8.9% year over year primarily driven 8% and 1% benefit from volume growth and favorable currency movements, respectively.
Revenues from Security, roughly 14.5% of net revenues, decreased 8.8% year over year to $476.8 million. Favorable currency impact of 2% and acquisition gain of 3% were more than offset by 14% negative impact of divestitures.
Margin Profile Improves
In the quarter, Stanley Black & Decker’s cost of sales increased 13.8% year over year, accounting for 61.8% of quarter’s net sales versus 62.4% in the year-ago quarter. Gross margin grew 60 basis points (bps) to 38.2% as benefits from volume growth and improved productivity offset the negative impact of commodity inflation.
Selling, general and administrative expenses increased 17.1% year over year while as a percentage of revenues, it grew 50 bps to 22.9%.
Balance Sheet & Cash Flow
Exiting the third quarter, Stanley Black & Decker had cash and cash equivalents of $483.3 million, down from $539.5 million in the previous quarter. Long-term debt (net of current portions) was roughly flat at $3,818 million.
In the quarter, the company generated net cash of $356.9 million from its operating activities, increasing 44.7% year over year. Capital spending totaled $91 million versus $78.1 million in the year-ago quarter. Free cash flow improved to $265.9 million compared with $168.6 million in the year-ago quarter.
During the quarter, the company paid cash dividends of approximately $94.7 million and repurchased shares worth $0.6 million.
Outlook
For 2017, Stanley Black & Decker increased its earnings forecast to $7.33-$7.43 per share from the previous projection of $7.18-$7.38, primarily on the back of benefits accrued from higher organic revenue growth (of roughly 6%), operational excellence and acquired assets. The revised guidance represents year-over-year growth of 13-14%.
Free cash flow conversion is predicted to be 100%.
Stanley Black & Decker, Inc. Price and Consensus
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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