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Will Stanley Black & Decker (SWK) Top Q3 Earnings Estimates?

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Industrial tool maker, Stanley Black & Decker, Inc. (SWK - Free Report) is slated to report third-quarter 2017 results on Oct 24, before the market opens.

In the past four quarters, the company delivered better-than-expected results, with an average positive earnings surprise of 4.27%. In the last quarter, the company’s earnings of $2.01 per share exceeded the Zacks Consensus Estimate by 2.55%.

Since the second-quarter 2017 results on Jul 24, the company’s shares have yielded 9.4% return, outperforming 8.1% gain of the industry it belongs to. Also, during the same time period, the company outperformed the S&P 500’s gain of 2.4%.



Let us see whether Stanley Black & Decker will be able to maintain its earnings streak this quarter.

Factors Likely to Drive Q3 Results

Growth prospects seem impressive for Stanley Black & Decker’s Tools & Storage segment, as evident from mid-single digit organic revenue growth expected in the year. The segmental results will get a boost from wide acceptance of DeWalt FlexVolt product and synergistic benefits from Newell Tools and Craftsman buyouts.

In the first two quarters of 2017, the surprise history of Tools & Storage segment has been impressive, with an average positive sales surprise of 1.64%. Third-quarter sales estimates are $2,228 million, an improvement over average sales of $2,057.5 million generated in the first half of the year.

Stanley Black & Decker anticipates earnings in the third quarter to be roughly 25% to 26% (average is 25.5%) of 2017 earnings expected range. Considering the projected adjusted earnings per share range of $7.18-$7.38, we believe that earnings in the third quarter will likely be within $1.80-$1.92 per share (mid-point is $1.86), way above $1.68 recorded in the year-ago quarter. On a separate note, we believe that the company’s shareholder-friendly policies will work in its favor in the quarters ahead.

Also, we believe that industrial machinery is among the many industries that have rallied on the back of the Trump government’s proposed infrastructure investment of $1 trillion. If implemented, the promised plan will boost the need for industrial products and hence benefit companies like Stanley Black & Decker. Other tailwinds are the strengthening housing and commercial construction markets. Also, rise of 2 percentage points in Purchasing Managers’ Index or manufacturing index in September is a positive indicator for the industry.

Why a Likely Positive Surprise?

Our proven model shows that Stanley Black & Decker is likely to pull off a surprise this quarter. That is because the stock has the combination of two key ingredients for a possible earnings beat — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks ESP: Stanley Black & Decker has an ESP of +0.84%, with the Most Accurate Estimate of $1.88 exceeding the Zacks Consensus Estimate of $1.86.

Stanley Black & Decker, Inc. Price and EPS Surprise

Stanley Black & Decker, Inc. Price and EPS Surprise | Stanley Black & Decker, Inc. Quote

Zacks Rank: Stanley Black & Decker’s Zacks Rank #2 increases the predictive power of ESP. Moreover, its positive ESP makes us reasonably confident of an earnings beat.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies in the machinery industry you may want to consider, as they have the right combination of elements to post an earnings beat this quarter, according to our model.

Kennametal Inc. (KMT - Free Report) , with an Earnings ESP of +2.63% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank  stocks here.

Lincoln Electric Holdings, Inc. (LECO - Free Report) , with an Earnings ESP of +1.21% and a Zacks Rank #2.

Altra Industrial Motion Corporation (AIMC - Free Report) , with an Earnings ESP of +7.10% and a Zacks Rank #2.  

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