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Stanley Black (SWK) Tops Q3 Earnings Estimates, Cuts '21 View

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Stanley Black & Decker, Inc. (SWK - Free Report) has reported impressive results for third-quarter 2021. Its earnings surpassed estimates by 12.15% and sales beat the same by 0.08%. The quarter’s earnings beat was the company’s eleventh consecutive quarter of impressive results.

Earnings, excluding acquisition-related charges and other one-time impacts, were $2.77 per share in the quarter, surpassing the Zacks Consensus Estimate of $2.47.    However, earnings decreased 4.2% from the year-ago quarter’s $2.89 per share as the positive impacts of sales growth and lower taxes were offset by higher costs.

Revenue Details

In the quarter under review, the company’s net sales were $4,263.2 million, reflecting a 10.7% increase from the year-ago quarter. The results benefitted 8% from a volume increase and 2% from favorable pricing. Foreign-currency translation too had a positive impact of 1%.

The company’s top line surpassed the Zacks Consensus Estimate of $4,260 million.

Stanley Black reports revenues under three segments. A brief discussion on the quarterly results is provided below:

Tools & Storage’s revenues totaled $3,185.9 million, representing 74.7% of net revenues in the quarter under review. On a year-over-year basis, the segment’s revenues increased 13.6%, driven by an 11% gain from volume, 2% growth from favorable pricing and a 1% favorable impact from foreign currency translation.

The Industrial segment generated revenues of $593.5 million, accounting for 13.9% of the net revenues in the reported quarter. Revenues grew 1.2% year over year as pricing gains of 2% and favorable currency impact of 1% were partially offset by a 1% decline in volumes.

The Security segment’s revenues, representing 11.4% of net revenues, increased 5.3% year over year to $483.8 million. The results benefitted a 7% from volume increase, a 1% gain from acquisitions and a 1% impact from favorable pricing.

Margin Profile

In the reported quarter, Stanley Black’s cost of sales (normalized) increased 16.2% year over year to $2,866.7 million. It represented 67.2% of the quarter’s net sales versus 64.1% in the year-ago quarter. The gross profit (normalized) increased 1% year over year to $1,396.5 million. The gross margin decreased 310 basis points (bps) to 32.8%.

Selling, general and administrative expenses increased 24.5% year over year to $875 million. It represented 20.5% of net sales in the reported quarter versus 18.3% in the year-ago quarter. Operating profits (normalized) decreased 23.4% year over year to $521.5 million, whereas the margin declined 550 bps to 12.2% due to the adverse impacts of supply-chain woes.

The adjusted tax rate in the reported quarter was 2% compared with the year-ago quarter figure of 17.8%.

Balance Sheet & Cash Flow

Exiting the third quarter of 2021, Stanley Black had cash and cash equivalents of $292.7 million, decreasing 33.5% from $440.4 million recorded in the last reported quarter. Long-term debt (net of current portions) of $4,246.9 million was flat on a sequential basis.

In the quarter under review, the company generated net cash of $4.6 million from its operating activities compared with $677.2 million generated in the year-ago quarter. Capital spending totaled $129.1 million versus $62.1 million in the third quarter of 2020.

In the reported quarter, Stanley Black paid out cash dividends of $126 million, up 15% from the previous year’s quarter. It invested $2.8 million for purchasing a common stock for treasury, representing an increase from $1.9 million in the year-ago quarter.

Outlook

The company has lowered its financial projections for 2021. It now anticipates adjusted earnings per share of $10.90-$11.10 compared with $11.35-$11.65 per share mentioned earlier. The impacts of labor, commodity and transit inflation are expected to be an adverse $690 million. The impacts of favorable currency movements are predicted to be $15 million.

Organic sales growth for the company is expected to be 16-17%, down from 16-18% mentioned previously.

Free cash flow is expected to be $1.1-$1.3 billion.

Stanley Black & Decker, Inc. Price, Consensus and EPS Surprise

 

Stanley Black & Decker, Inc. Price, Consensus and EPS Surprise

Stanley Black & Decker, Inc. price-consensus-eps-surprise-chart | Stanley Black & Decker, Inc. Quote

Zacks Rank & Stocks to Consider

With a market capitalization of $30.4 billion, Stanley Black currently carries a Zacks Rank #3 (Hold).

Some better-ranked players in the Zacks Industrial Products sector are Nordson Corporation (NDSN - Free Report) , HeritageCrystal Clean, Inc. , and Casella Waste Systems, Inc. (CWST - Free Report) . While Nordson and HeritageCrystal currently sport a Zacks Rank #1 (Strong Buy), Casella Waste carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, earnings estimates for the companies improved for the current year. Further, earnings surprise for the last reported quarter was 14.15% for Nordson, 33.90% for HeritageCrystal, and 4.17% for Casella Waste.


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