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Stanley Black (SWK) Buys MTD & Excel, Expands Product Lines

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Stanley Black & Decker, Inc. (SWK - Free Report) recently announced that it acquired two major providers of outdoor power equipment for $1.9 billion in aggregate. The acquisitions made by the company include an 80% stake in MTD Holdings Inc. and Excel Industries. The buyouts will likely enhance the company’s cordless electric outdoor power equipment offerings and complement its brands like CRAFTSMAN, DEWALT and BLACK+DECKER.

It’s worth noting that Stanley Black previously owned a 20% stake in MTD Holdings, having acquired the interest for $234 million in cash in 2019.

Stanley Black’s shares gained 1.1% in the past couple of days, closing the trading session at $176.64 on Thursday.

Inside the Headlines

MTD Holdings is a renowned name in the outdoor space. The company manufactures and sells walk-behind mowers, lawn tractors, residential robotic mowers, zero-turn mowers, handheld outdoor power equipment, snow blowers and garden tools. Its products are developed for use in professional and residential markets. Based in Valley City, OH, the privately held company operates facilities in Europe and North America. Products offered are sold under brand names like WOLF-Garten, Cub Cadet, Robomow, Troy-Bilt and Rover.

Headquartered in Hesston, KS, Excel Industries specializes in designing and producing commercial and residential turf equipment. It sells its products under the brand names like BigDog Mower Co. (“BigDog”) and Hustler Turf Equipment (“Hustler”).

With the growing popularity for home and outdoor products as well as electrification, Stanley Black’s acquisitions of MTD Holdings and Excel Industries will strengthen its prospects in the outdoor products market, which is worth about $25 billion. The inclusion of MTD Holdings’ and Excel Industries’ complementary brands, widespread dealer networks and strong customer base will also be tailwinds for Stanley Black.

As noted, the buyouts are anticipated to boost Stanley Black’s adjusted earnings by 50 cents per share in 2022. Stanley Black included transaction-related charges of 20-30 cents into its guidance of GAAP earnings per share for 2021. Consequently, it updated its outlook for GAAP earnings per share, which currently lies in the range of $9.70-$10.05 compared with $10.00-$10.25 predicted earlier.

Zacks Rank, Estimates and Price Performance

With a $27.9-billion market capitalization, Stanley Black currently carries a Zacks Rank #5 (Strong Sell). The company has been dealing with escalating costs and expenses, which might affect its margins and profitability in the quarters ahead. A rise in debt levels can increase its financial obligations and hurt profitability. However, it is likely to gain from a diversified business portfolio and synergistic gains from acquired assets.

Zacks Investment ResearchImage Source: Zacks Investment Research

In the past three months, the company’s shares have declined 7.6% compared with the industry’s fall of 9.4%.

In the past 30 days, the Zacks Consensus Estimate for the company’s earnings moved down 2.2% to $10.81 for 2021 on four downward estimate revisions against none upward. Over the same time frame, the consensus estimate for 2022 earnings inched down 1% to $11.81 on four downward estimate revisions against one upward.

Key Picks

Some better-ranked companies from the Zacks Industrial Products sector are discussed below.

SPX FLOW, Inc. presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. Its earnings surprise in the last four quarters was 40.42%, on average.

In the past 30 days, SPX FLOW’s earnings estimates have increased 8% for 2021 and 17.9% for 2022. Its shares have gained 7.1% in the past three months.

AZZ Inc. (AZZ - Free Report) presently carries a Zacks Rank #2 (Buy). Its earnings surprise in the last four quarters was 25.47%, on average.

In the past 30 days, AZZ’s earnings estimates have been stable for fiscal 2022 (ending February 2022) and for fiscal 2023 (ending February 2023). Its shares have gained 0.1% in the past three months.

Welbilt, Inc. (WBT - Free Report) presently carries a Zacks Rank #2. Its earnings surprise in the last four quarters was 172.50%, on average.

Welbilt’s earnings estimates have increased 4.8% for 2021 and 3.4% for 2022 in the past 30 days. Its shares have declined 0.1% in the past three months.


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