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Stanley Black & Decker Up to Neutral

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We recently upgraded our recommendation on Stanley Black & Decker, Inc. (SWK - Free Report) from Underperform to Neutral.
Why the Upgrade?

The upward revision on Stanley Black & Decker’s recommendation followed the Dec 12 announcement of the company’s financial outlook for 2014. Earnings per share, excluding one-time charges, are predicted at $5.30–$5.50, up 9.1% year over year at midpoint.

Organic revenue growth is expected at 4% versus 3% projected for 2013. Security margin improvement, cost reductions in the segments and synergies from the Infastech acquisition were positive drivers while unfavourable impacts from foreign currency translation, higher tax rate and interest expenses subdued the momentum.

Stanley Black & Decker also intends to use its free cash flow for acquisitions, reducing debt levels and rewarding shareholders before returning to its 50/50 allocation strategy post 2015.

We believe the industrial tool maker has solid long-term growth prospects and seems well positioned to benefit from the increase in industrial tools demand globally and its rising exposure to emerging markets. Year to date, the company has provided a return of 9.6%.

Other Stocks in the Industry

Stanley Black & Decker currently has a $12.5 billion market capitalization and carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same industry include NN Inc. (NNBR - Free Report) , Flow International Corporation (FLOW - Free Report) and Lincoln Electric Holdings Inc. (LECO - Free Report) . While NN Inc holds a Zacks Rank #1 (Strong Buy), both Flow International and Lincoln Electric carry a Zacks Rank #2 (Buy).

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