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Stanley Black (SWK) Q1 Earnings Top Estimates, Revenues Miss

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Stanley Black & Decker, Inc. (SWK - Free Report) has reported mixed first-quarter 2022 results. The company’s earnings surpassed the Zacks Consensus Estimate by 25%, whereas sales lagged the same by 3.1%.

In the reported quarter, the company’s adjusted earnings were $2.10 per share, surpassing the Zacks Consensus Estimate of $1.68. The bottom line decreased 32.9% from the year-ago quarter’s figure of $3.13. Lower volume, supply-chain restrictions and cost inflation played spoilsports in the quarter.

Revenue Details

In the quarter under review, the company’s net sales were $4,448 million, reflecting year-over-year growth of 19.5%. The results benefited 23% from acquired assets and 5% from favorable pricing. Foreign-currency translation had an adverse impact of 2%, and lower volume affected sales by 6% due to logistics issues and supply-chain restrictions.

The company’s top line lagged the Zacks Consensus Estimate of $4,588 million.

It reports net sales under two segments, namely Tools & Outdoor and Industrial. The segmental information is briefly discussed below:

Revenues from Tools & Outdoor totaled $3,801.2 million, rising 24% year over year. Acquisitions (Excel and MTD) contributed 27% and pricing added 5% to sales growth, while foreign-currency translations lowered sales by 2%. Lower volumes had an adverse impact of 6%.

Revenues from Industrial grossed $646.6 million, decreasing 2% year over year. The segment suffered 5% from lower volumes and 2% from forex woes. Effective pricing had a positive impact of 5%.

Margin Profile

In the reported quarter, Stanley Black’s cost of sales increased 34.7% year over year to $3,142.6 million. It represented 70.7% of the quarter’s net sales versus 62.7% in the year-ago quarter. The gross profit decreased 5.9% to $1,305.4 million. The gross margin decreased 800 basis points (bps) to 29.3%. Lower volumes, supply-chain issues and commodity inflation more than offset the positive impact of effective pricing.

Selling, general and administrative expenses increased 33.5% year over year to $960.3 million. It represented 21.6% of net sales in the reported quarter versus 19.3% in the year-ago quarter. Operating profits decreased 48.4% to $345.1 million, whereas the margin declined 1,020 bps to 7.8% due to the adverse impacts of supply-chain woes and cost inflation.

The adjusted tax rate in the reported quarter was 13.2%.

Balance Sheet and Cash Flow

Exiting the first quarter, Stanley Black had cash and cash equivalents of $165.8 million, up 16.5% from $142.3 million at the end of the last reported quarter. The long-term debt balance increased 23% sequentially to $5,355.5 million.

In the first three months of 2022, net cash used in operating activities was $1,241.1 million compared with $157.8 million used in the year-ago period. Capital and software expenditures totaled $139.8 million, up from $88.3 million. Free cash outflow in the first three months of the year was $1,380.9 million compared with $246.1 million a year ago.

During the first three months of 2022, Stanley Black spent $36.5 million net of cash acquired on business buyouts. It paid out dividends worth $116.3 million to its shareholders, up 5.6% from the year-ago period. Purchases of common stock for treasury were nil against $9.4 million in the year-ago period.

Outlook

For 2022, Stanley Black anticipates adjusted earnings per share of $9.50-$10.50 compared with $12.00-$12.50 guided previously. Total sales are expected to be up in the mid-twenties range year over year. Also, free cash flow is expected to be $1-$1.5 billion.

Zacks Rank & Stocks to Consider

The company currently carries a Zacks Rank #3 (Hold).

Some better-ranked companies are discussed below.

AZZ Inc. (AZZ - Free Report) presently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. Its earnings surprise for the last four quarters was 22.3%, on average.

AZZ’s earnings estimates increased 12.6% for fiscal 2022 (ending February 2022) in the past 60 days. Its shares have lost 2.1% in the past three months.

Alcoa Corporation (AA - Free Report) presently sports a Zacks Rank #1. Its earnings surprise in the last four quarters was 11.5%, on average.

In the past 60 days, AA’s earnings estimates have increased 72.1% for 2022. The stock has rallied 24.5% in the past three months.

Ferguson plc (FERG - Free Report) presently carries a Zacks Rank of 2 (Buy). FERG delivered a trailing four-quarter earnings surprise of 14.2%, on average.

Earnings estimates of Ferguson have increased 7% for fiscal 2022 (ending July 2022) in the past 60 days. FERG’s shares have declined 19.7% in the past three months.


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