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Stanley Black & Decker (SWK) Down 6.2% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Stanley Black & Decker (SWK - Free Report) . Shares have lost about 6.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Stanley Black & Decker due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Stanley Black Q2 Earnings & Revenues Beat
Stanley Black reported second-quarter 2023 adjusted loss of 11 cents per share, narrower than the Zacks Consensus Estimate of a loss of 38 cents per share. The bottom line decreased 106.2% year over year from the year-ago quarter’s figure of $1.77 per share due to lower sales.
Revenue Details
In the quarter under review, Stanley Black’s net sales were $4,158.9 million, reflecting a year-over-year decline of 5.3%. The Oil & Gas divestiture had a negative impact of 1% and lower volume affected sales 5%. However, the results benefited 1% from favorable pricing. SWK’s top line outperformed the Zacks Consensus Estimate of $4,122 million.
Stanley Black reports net sales under two segments, namely Tools & Outdoor and Industrial. The segmental information is briefly discussed below:
Revenues from the Tools & Outdoor segment totaled $3,542.2 million, decreasing 5.4% year over year. Our estimate for segmental revenues was $3,465.4 million. Lower volumes affected sales 13% while pricing added 1% to sales growth.
Revenues from the Industrial segment grossed $616.7 million, decreasing 4.8% year over year. Our estimate for segmental revenues was $631.4 million. Forex woes had a negative impact of 1%, the Oil & Gas divestiture had an adverse impact of 7% and lower volumes had a negative effect of 1%. However, the segment gained 4% from effective pricing.
Margin Profile
In the reported quarter, Stanley Black’s cost of sales increased 1.3% year over year to $3,226.8 million. The gross profit decreased 22.8% to $932.1 million. The gross margin decreased 510 basis points (bps) to 22.4%.
Selling, general and administrative expenses decreased 1.8% year over year to $837.3 million. Operating profit was $94.8 million in the quarter, compared with $354.4 million reported in the year-ago quarter. The margin declined 580 bps to 2.3%.
Balance Sheet and Cash Flow
While exiting the second quarter, Stanley Black had cash and cash equivalents of $391.4 million, compared with $395.6 million reported at the end of fourth-quarter 2022. The long-term debt balance was $6,099.9 million, higher than $5,352.9 million reported at the end of fourth-quarter 2022.
In the first six months of 2023, net cash used in operating activities was $21.9 million, compared with $1,685.0 million cash used in the year-ago period. Capital and software expenditures totaled $136.5 million, down from $285.5 million reported in the year-ago period. Free cash outflow (before dividends) in the year was $158.4 million, compared with $1,970.5 million free cash outflow a year ago.
SWK paid out dividends worth $239.5 million to its shareholders, up 4% from the year-ago period. Purchases of common stock for treasury were $5.6 million, compared with $2,314.1 million in the year-ago period.
2023 Guidance Narrowed
Stanley Black anticipates earnings in the range of a loss of $1.25 per share to a loss of 50 cents per share for 2023, compared with a loss of $1.65 per share to earnings of 60 cents per share predicted earlier. Adjusted earnings are expected to be 70 cents-$1.30 per share, compared with the prior guidance of $0.00- $2.00 per share.
Free cash flow is expected to be $0.6 billion to $0.9 billion for 2023, compared with $0.5 billion to $1.0 billion predicted earlier.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
The consensus estimate has shifted 18.02% due to these changes.
VGM Scores
At this time, Stanley Black & Decker has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Stanley Black & Decker has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Stanley Black & Decker (SWK) Down 6.2% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Stanley Black & Decker (SWK - Free Report) . Shares have lost about 6.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Stanley Black & Decker due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Stanley Black Q2 Earnings & Revenues Beat
Stanley Black reported second-quarter 2023 adjusted loss of 11 cents per share, narrower than the Zacks Consensus Estimate of a loss of 38 cents per share. The bottom line decreased 106.2% year over year from the year-ago quarter’s figure of $1.77 per share due to lower sales.
Revenue Details
In the quarter under review, Stanley Black’s net sales were $4,158.9 million, reflecting a year-over-year decline of 5.3%. The Oil & Gas divestiture had a negative impact of 1% and lower volume affected sales 5%. However, the results benefited 1% from favorable pricing. SWK’s top line outperformed the Zacks Consensus Estimate of $4,122 million.
Stanley Black reports net sales under two segments, namely Tools & Outdoor and Industrial. The segmental information is briefly discussed below:
Revenues from the Tools & Outdoor segment totaled $3,542.2 million, decreasing 5.4% year over year. Our estimate for segmental revenues was $3,465.4 million. Lower volumes affected sales 13% while pricing added 1% to sales growth.
Revenues from the Industrial segment grossed $616.7 million, decreasing 4.8% year over year. Our estimate for segmental revenues was $631.4 million. Forex woes had a negative impact of 1%, the Oil & Gas divestiture had an adverse impact of 7% and lower volumes had a negative effect of 1%. However, the segment gained 4% from effective pricing.
Margin Profile
In the reported quarter, Stanley Black’s cost of sales increased 1.3% year over year to $3,226.8 million. The gross profit decreased 22.8% to $932.1 million. The gross margin decreased 510 basis points (bps) to 22.4%.
Selling, general and administrative expenses decreased 1.8% year over year to $837.3 million. Operating profit was $94.8 million in the quarter, compared with $354.4 million reported in the year-ago quarter. The margin declined 580 bps to 2.3%.
Balance Sheet and Cash Flow
While exiting the second quarter, Stanley Black had cash and cash equivalents of $391.4 million, compared with $395.6 million reported at the end of fourth-quarter 2022. The long-term debt balance was $6,099.9 million, higher than $5,352.9 million reported at the end of fourth-quarter 2022.
In the first six months of 2023, net cash used in operating activities was $21.9 million, compared with $1,685.0 million cash used in the year-ago period. Capital and software expenditures totaled $136.5 million, down from $285.5 million reported in the year-ago period. Free cash outflow (before dividends) in the year was $158.4 million, compared with $1,970.5 million free cash outflow a year ago.
SWK paid out dividends worth $239.5 million to its shareholders, up 4% from the year-ago period. Purchases of common stock for treasury were $5.6 million, compared with $2,314.1 million in the year-ago period.
2023 Guidance Narrowed
Stanley Black anticipates earnings in the range of a loss of $1.25 per share to a loss of 50 cents per share for 2023, compared with a loss of $1.65 per share to earnings of 60 cents per share predicted earlier. Adjusted earnings are expected to be 70 cents-$1.30 per share, compared with the prior guidance of $0.00- $2.00 per share.
Free cash flow is expected to be $0.6 billion to $0.9 billion for 2023, compared with $0.5 billion to $1.0 billion predicted earlier.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
The consensus estimate has shifted 18.02% due to these changes.
VGM Scores
At this time, Stanley Black & Decker has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Stanley Black & Decker has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.