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Here's Why Hold Strategy is Apt for Stanley Black (SWK) Stock
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Stanley Black & Decker, Inc. (SWK - Free Report) is benefiting from strength in the engineered fastening business despite lower consumer outdoor and DIY market demand, and rising expenses.
Let us discuss the factors why investors should retain the stock for the time being.
Growth Catalysts
Business Strength: Strength in aerospace and auto end markets is aiding the company’s engineered fastening business. SWK’s global cost-reduction program is expected to aid the company’s bottom line and drive margin performance in the quarters ahead. Stanley Black has been making efforts to eliminate and reduce overlapping capabilities and functions. It is resizing operations to ensure that resources better serve core businesses.
In 2023, the company generated pre-tax run rate savings of $835 million from a global cost-reduction program. SWK expects to generate run rate savings of $1.5 billion by the end of 2024. By 2025, it envisions run rate savings of $2 billion. Supply-chain optimization programs and inventory reduction efforts are also expected to boost margins. In 2023, Stanley Black reduced its inventory by $1.1 billion. Benefiting from supply-chain transformation and inventory reductions, Stanley Black expects to achieve adjusted gross margins of more than 30% in 2024.
Focus on Core Operations: Stanley Black has been divesting non-core operations to drive growth. In December 2023, Stanley Black inked a deal to divest its STANLEY Infrastructure (Infrastructure) business to Epiroc AB for a cash amount of $760 million. The divestment will help Stanley Black focus on the core businesses while supporting its capital allocation priorities. The company expects to use the cash proceeds of the transaction, net of modest taxes, to reduce its debt. The completion of the deal is conditioned on regulatory approvals and customary closing conditions.
In July 2022, SWK divested its Security Business to Securitas AB for $3.2 billion cash. It funded its debt reduction from the net proceeds of this sale. In the same month, it divested its Automatic Doors business to Allegion for $900 million in cash.
Rewards to Shareholders: The company is committed to rewarding its shareholders handsomely. In 2023, SWK paid dividends of $482.6 million, up 3.6% year over year. It also bought back shares worth $16.1 million in the same period. In July 2023, the company hiked its dividend by a penny to 81 cents per share (annually: $3.24 per share).
In light of the above-mentioned positives, we believe, investors should retain SWK stock for now, as suggested by its current Zacks Rank #3 (Hold). In the past six months, shares of the company have gained 13.2%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked companies from the Industrial Products sector are discussed below:
The Zacks Consensus Estimate for AIT’s fiscal 2024 earnings has increased 1% in the past 60 days. The stock has gained 18% in the past six months.
Illinois Tool Works Inc. (ITW - Free Report) presently carries a Zacks Rank #2 (Buy) and a trailing four-quarter earnings surprise of 3.3%, on average.
ITW’s earnings estimates have remained steady for 2024 in the past 60 days. Shares of Illinois Tool have risen 10.9% in the past six months.
Crane Company (CR - Free Report) presently carries a Zacks Rank of 2. It has a trailing four-quarter average earnings surprise of 25.1%.
The Zacks Consensus Estimate for CR’s 2024 earnings increased 1.7% in the past 60 days. Shares of Crane Company have soared 54.9% in the past six months.
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Here's Why Hold Strategy is Apt for Stanley Black (SWK) Stock
Stanley Black & Decker, Inc. (SWK - Free Report) is benefiting from strength in the engineered fastening business despite lower consumer outdoor and DIY market demand, and rising expenses.
Let us discuss the factors why investors should retain the stock for the time being.
Growth Catalysts
Business Strength: Strength in aerospace and auto end markets is aiding the company’s engineered fastening business. SWK’s global cost-reduction program is expected to aid the company’s bottom line and drive margin performance in the quarters ahead. Stanley Black has been making efforts to eliminate and reduce overlapping capabilities and functions. It is resizing operations to ensure that resources better serve core businesses.
In 2023, the company generated pre-tax run rate savings of $835 million from a global cost-reduction program. SWK expects to generate run rate savings of $1.5 billion by the end of 2024. By 2025, it envisions run rate savings of $2 billion. Supply-chain optimization programs and inventory reduction efforts are also expected to boost margins. In 2023, Stanley Black reduced its inventory by $1.1 billion. Benefiting from supply-chain transformation and inventory reductions, Stanley Black expects to achieve adjusted gross margins of more than 30% in 2024.
Focus on Core Operations: Stanley Black has been divesting non-core operations to drive growth. In December 2023, Stanley Black inked a deal to divest its STANLEY Infrastructure (Infrastructure) business to Epiroc AB for a cash amount of $760 million. The divestment will help Stanley Black focus on the core businesses while supporting its capital allocation priorities. The company expects to use the cash proceeds of the transaction, net of modest taxes, to reduce its debt. The completion of the deal is conditioned on regulatory approvals and customary closing conditions.
In July 2022, SWK divested its Security Business to Securitas AB for $3.2 billion cash. It funded its debt reduction from the net proceeds of this sale. In the same month, it divested its Automatic Doors business to Allegion for $900 million in cash.
Rewards to Shareholders: The company is committed to rewarding its shareholders handsomely. In 2023, SWK paid dividends of $482.6 million, up 3.6% year over year. It also bought back shares worth $16.1 million in the same period. In July 2023, the company hiked its dividend by a penny to 81 cents per share (annually: $3.24 per share).
In light of the above-mentioned positives, we believe, investors should retain SWK stock for now, as suggested by its current Zacks Rank #3 (Hold). In the past six months, shares of the company have gained 13.2%.
Image Source: Zacks Investment Research
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 (Strong Buy). It has a trailing four-quarter average earnings surprise of 10.4%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for AIT’s fiscal 2024 earnings has increased 1% in the past 60 days. The stock has gained 18% in the past six months.
Illinois Tool Works Inc. (ITW - Free Report) presently carries a Zacks Rank #2 (Buy) and a trailing four-quarter earnings surprise of 3.3%, on average.
ITW’s earnings estimates have remained steady for 2024 in the past 60 days. Shares of Illinois Tool have risen 10.9% in the past six months.
Crane Company (CR - Free Report) presently carries a Zacks Rank of 2. It has a trailing four-quarter average earnings surprise of 25.1%.
The Zacks Consensus Estimate for CR’s 2024 earnings increased 1.7% in the past 60 days. Shares of Crane Company have soared 54.9% in the past six months.