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Why You Must Avoid Stanley Black (SWK) Stock at the Moment
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Stanley Black & Decker, Inc. (SWK - Free Report) has failed to impress investors with its recent operational performance due to unfavorable end-market conditions and other challenges, which are likely to hurt its earnings in the near term.
Image Source: Zacks Investment Research
The currently Zacks Rank #5 (Strong Sell) player has a market capitalization of $18.1 billion. In the past three months, the stock has lost 25.9% compared with the industry’s decline of 17.8%.
Let’s discuss the factors that might continue ailing the stock.
Weak End-Market Conditions: Stanley Black is experiencing persistent softness in engineered fastening business on account of a market-led decline in automotive and weakness in the infrastructure end market. Also, weakness in new residential construction, repair/remodel and commercial construction end markets might be concerning for Stanley Black’s performance in the quarters ahead.
Elevated Costs and Expenses: SWK is witnessing the negative impacts of escalating costs and expenses. In the first quarter of 2022, Stanley Black’s cost of sales and selling, general and administrative expenses expanded 34.7% and 33.5%, respectively, year over year due to cost inflation. SWK anticipates commodity, currency and other cost-related headwinds to be $1.4 billion in 2022, higher than $700 million reported in 2021. Also, the effects of supply-chain restrictions are likely to continue draining its margins and profitability.
High Debt Level: SWK’s profitability can be hurt by a highly leveraged balance sheet. Stanley Black’s long-term debt remained high at $5,355.5 million while exiting the first quarter 2022, increasing 23% sequentially. SWK’s cash and cash equivalents were $165.8 million, which seem unimpressive considering its heavy debt load.
Unfavorable Forex: Given its widespread presence, SWK’s performance is exposed to risks arising from geopolitical tensions, trade relations and adverse movements in foreign currencies. Forex woes hampered Stanley Black’s sales by 2% on a year-over-year basis in the first quarter of 2022. The performance of its overseas business might be depressed by a stronger U.S. dollar in the quarters ahead.
Southbound Estimate Trend: In the past 60 days, the Zacks Consensus Estimate for SWK’s 2022 earnings has declined from $12.08 to $10.04 on six downward estimate revisions against none upward. Over the same time frame, the consensus estimate for 2023 earnings has decreased from $13.17 to $11.37 on five southward estimate revisions against none in the opposite direction.
Zacks Rank & Stocks to Consider
Some better-ranked companies from the industrial products sector are discussed below:
AIT’s earnings estimates have increased 5.9% for fiscal 2022 (ending June 2022) in the past 60 days. Its shares have rallied 5.2% in the past three months.
Roper Technologies, Inc. (ROP - Free Report) presently has a Zacks Rank #2 (Buy). Its earnings surprise in the last four quarters was 2%, on average.
In the past 60 days, ROP’s earnings estimates have increased 1.2% for 2022. The stock has declined 0.5% in the past three months.
IDEX Corporation (IEX - Free Report) is presently Zacks #2 Ranked. IEX’s earnings surprise in the last four quarters was 2.8%, on average.
In the past 60 days, the stock’s earnings estimates have increased 3.4% for 2022. IEX has inched up 1.8% in the past three months.
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Why You Must Avoid Stanley Black (SWK) Stock at the Moment
Stanley Black & Decker, Inc. (SWK - Free Report) has failed to impress investors with its recent operational performance due to unfavorable end-market conditions and other challenges, which are likely to hurt its earnings in the near term.
Image Source: Zacks Investment Research
The currently Zacks Rank #5 (Strong Sell) player has a market capitalization of $18.1 billion. In the past three months, the stock has lost 25.9% compared with the industry’s decline of 17.8%.
Let’s discuss the factors that might continue ailing the stock.
Weak End-Market Conditions: Stanley Black is experiencing persistent softness in engineered fastening business on account of a market-led decline in automotive and weakness in the infrastructure end market. Also, weakness in new residential construction, repair/remodel and commercial construction end markets might be concerning for Stanley Black’s performance in the quarters ahead.
Elevated Costs and Expenses: SWK is witnessing the negative impacts of escalating costs and expenses. In the first quarter of 2022, Stanley Black’s cost of sales and selling, general and administrative expenses expanded 34.7% and 33.5%, respectively, year over year due to cost inflation. SWK anticipates commodity, currency and other cost-related headwinds to be $1.4 billion in 2022, higher than $700 million reported in 2021. Also, the effects of supply-chain restrictions are likely to continue draining its margins and profitability.
High Debt Level: SWK’s profitability can be hurt by a highly leveraged balance sheet. Stanley Black’s long-term debt remained high at $5,355.5 million while exiting the first quarter 2022, increasing 23% sequentially. SWK’s cash and cash equivalents were $165.8 million, which seem unimpressive considering its heavy debt load.
Unfavorable Forex: Given its widespread presence, SWK’s performance is exposed to risks arising from geopolitical tensions, trade relations and adverse movements in foreign currencies. Forex woes hampered Stanley Black’s sales by 2% on a year-over-year basis in the first quarter of 2022. The performance of its overseas business might be depressed by a stronger U.S. dollar in the quarters ahead.
Southbound Estimate Trend: In the past 60 days, the Zacks Consensus Estimate for SWK’s 2022 earnings has declined from $12.08 to $10.04 on six downward estimate revisions against none upward. Over the same time frame, the consensus estimate for 2023 earnings has decreased from $13.17 to $11.37 on five southward estimate revisions against none in the opposite direction.
Zacks Rank & Stocks to Consider
Some better-ranked companies from the industrial products sector are discussed below:
Applied Industrial Technologies, Inc. (AIT - Free Report) presently sports a Zacks Rank #1. AIT delivered a trailing four-quarter earnings surprise of 25.4%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AIT’s earnings estimates have increased 5.9% for fiscal 2022 (ending June 2022) in the past 60 days. Its shares have rallied 5.2% in the past three months.
Roper Technologies, Inc. (ROP - Free Report) presently has a Zacks Rank #2 (Buy). Its earnings surprise in the last four quarters was 2%, on average.
In the past 60 days, ROP’s earnings estimates have increased 1.2% for 2022. The stock has declined 0.5% in the past three months.
IDEX Corporation (IEX - Free Report) is presently Zacks #2 Ranked. IEX’s earnings surprise in the last four quarters was 2.8%, on average.
In the past 60 days, the stock’s earnings estimates have increased 3.4% for 2022. IEX has inched up 1.8% in the past three months.