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SWK's Q3 Earnings Surge on Margin Expansion, 2026 Outlook Raised
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Key Takeaways
SWK's Q3 adjusted earnings surged 61.5% to $2.31 per share, while adjusted gross margin rose to 39.4%.
Tools & Outdoor sales grew 2.5%, with a 48.4% profit jump, while Engineered Fastening revenues fell 21%.
SWK raised its 2026 adjusted EPS outlook to $5.95-$6.25 and free cash flow forecast to $1.0-$1.2 billion.
Stanley Black & Decker (SWK - Free Report) reported adjusted earnings of $2.31 per share for the third quarter of 2026, up 61.5% from $1.43 in the year-ago quarter. GAAP earnings increased to $1.83 per share from 34 cents a year ago. Net tariff refunds benefited adjusted earnings by approximately 67 cents per share.
Net sales of $3.73 billion declined 0.6% year over year, while organic revenues increased 4%. Higher volumes in U.S. retail and commercial & industrial channels, productivity improvements and tariff refunds supported profitability. Adjusted gross margin expanded 780 basis points to 39.4%, including a 430-basis-point benefit from net tariff refunds.
SWK's Tools & Outdoor Business Gains Momentum
Tools & Outdoor revenues increased 2.5% year over year to $3.34 billion, driven by a 7% increase in volumes. This was partially offset by a 3% decline in pricing and a 2% negative impact from a licensing model transition for gas walk-behind outdoor products.
Organic revenues increased 4%, supported by growth in power tools. North American organic sales grew 6%, while Europe registered 1% organic growth. Rest of World organic revenues declined 1%. Within the segment, power tools organic revenues increased 10%, hand tools, accessories and storage grew 2%, while outdoor products declined 12%.
Segment profit increased 48.4% year over year to $568.7 million. Adjusted segment margin expanded 560 basis points to 17.6%, reflecting net productivity gains, favorable product mix and tariff refunds.
Stanley Black's Engineered Fastening Business Faces Pressure
Engineered Fastening revenues declined 21% year over year to $395.5 million, primarily due to the divestiture of the Consolidated Aerospace Manufacturing (CAM) business. The divestiture reduced sales by 22%, while higher volumes and pricing contributed 1% each.
Segment profit declined 22.9% year over year to $46.1 million. Adjusted segment margin contracted 110 basis points to 11.7%, primarily due to automotive demand pressure. Unlike Tools & Outdoor, the segment did not benefit from tariff refunds.
SWK's Profitability Improves on Lower Costs
Stanley Black's cost of sales declined 11.6% year over year to $2.28 billion. Gross profit increased 23.3% to $1.45 billion, lifting the reported gross margin by 760 basis points to 39%.
Selling, general and administrative expenses increased 14.3% year over year to $904.5 million, representing 24.2% of sales compared with 21.1% in the prior-year quarter. The increase included incremental costs and investments associated with tariff refunds.
Adjusted EBITDA increased 32.1% to $609.1 million, while adjusted EBITDA margin expanded 400 basis points to 16.3%. Net earnings rose to $272.1 million from $51.4 million a year earlier.
Stanley Black's Cash Flow and Balance Sheet Strengthen
Stanley Black ended the quarter with cash and cash equivalents of $741.2 million compared with $280.1 million as of Jan. 3, 2026. Long-term debt was $4.70 billion, largely unchanged from the beginning of the year. Short-term borrowings and current maturities of long-term debt were eliminated.
Cash provided by operating activities increased to $658.5 million from $221.2 million in the year-ago quarter. Capital and software expenditures totaled $73.5 million, resulting in free cash flow of $585 million compared with $155.3 million a year earlier.
During the quarter, the company repurchased approximately 2.5 million shares for $250 million and paid cash dividends of $122.9 million. The board also approved a new $1 billion share repurchase authorization, effective through October 2029.
SWK Raises 2026 Earnings and Cash Flow Outlook
Management raised its 2026 GAAP earnings guidance to $5.45-$5.85 per share from the previous range of $4.60-$5.45. Adjusted earnings are now projected at $5.95-$6.25 per share, up from the earlier guidance of $5.20-$5.80.
The company also increased its free cash flow forecast to $1.0-$1.2 billion from $600-$800 million. The revised outlook incorporates tariff refunds received year-to-date and projected taxes and fees associated with the CAM divestiture.
For the fourth quarter, management expects net sales of approximately $3.6 billion and adjusted earnings of $1.45 per share. Adjusted gross margin is projected at 34-35%, while the long-term target remains 35-37%.
The company anticipates low-single-digit organic revenue growth for 2026, with approximately flat total sales. Management expects adjusted EBITDA margin improvement year over year, supported by continued productivity initiatives and operational execution.
Zacks Rank & Other Key Picks
The company currently carries a Zacks Rank #2 (Buy). Some other top-ranked stocks from the same space are discussed below.
GTES delivered a trailing four-quarter average earnings surprise of 6.6%. In the past 60 days, the Zacks Consensus Estimate for Gates Industrial’s 2026 earnings has increased 1.2%.
Applied Industrial Technologies (AIT - Free Report) presently carries a Zacks Rank of 2. It has a trailing four-quarter average earnings surprise of 3.6%.
The Zacks Consensus Estimate for AIT’s fiscal 2027 (ending June 2027) earnings has improved 0.5% in the past 60 days.
IDEX Corporation (IEX - Free Report) presently carries a Zacks Rank of 2. The company delivered a trailing four-quarter average earnings surprise of 7.6%.
In the past 60 days, the consensus estimate for IEX’s 2026 earnings has increased 1.5%.
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SWK's Q3 Earnings Surge on Margin Expansion, 2026 Outlook Raised
Key Takeaways
Stanley Black & Decker (SWK - Free Report) reported adjusted earnings of $2.31 per share for the third quarter of 2026, up 61.5% from $1.43 in the year-ago quarter. GAAP earnings increased to $1.83 per share from 34 cents a year ago. Net tariff refunds benefited adjusted earnings by approximately 67 cents per share.
Net sales of $3.73 billion declined 0.6% year over year, while organic revenues increased 4%. Higher volumes in U.S. retail and commercial & industrial channels, productivity improvements and tariff refunds supported profitability. Adjusted gross margin expanded 780 basis points to 39.4%, including a 430-basis-point benefit from net tariff refunds.
SWK's Tools & Outdoor Business Gains Momentum
Tools & Outdoor revenues increased 2.5% year over year to $3.34 billion, driven by a 7% increase in volumes. This was partially offset by a 3% decline in pricing and a 2% negative impact from a licensing model transition for gas walk-behind outdoor products.
Organic revenues increased 4%, supported by growth in power tools. North American organic sales grew 6%, while Europe registered 1% organic growth. Rest of World organic revenues declined 1%. Within the segment, power tools organic revenues increased 10%, hand tools, accessories and storage grew 2%, while outdoor products declined 12%.
Segment profit increased 48.4% year over year to $568.7 million. Adjusted segment margin expanded 560 basis points to 17.6%, reflecting net productivity gains, favorable product mix and tariff refunds.
Stanley Black's Engineered Fastening Business Faces Pressure
Engineered Fastening revenues declined 21% year over year to $395.5 million, primarily due to the divestiture of the Consolidated Aerospace Manufacturing (CAM) business. The divestiture reduced sales by 22%, while higher volumes and pricing contributed 1% each.
Organic revenues increased 2%, driven by broad-based industrial strength. Industrial organic sales grew 10%, while automotive organic revenues declined 2%, reflecting weaker-than-expected automotive demand.
Segment profit declined 22.9% year over year to $46.1 million. Adjusted segment margin contracted 110 basis points to 11.7%, primarily due to automotive demand pressure. Unlike Tools & Outdoor, the segment did not benefit from tariff refunds.
SWK's Profitability Improves on Lower Costs
Stanley Black's cost of sales declined 11.6% year over year to $2.28 billion. Gross profit increased 23.3% to $1.45 billion, lifting the reported gross margin by 760 basis points to 39%.
Selling, general and administrative expenses increased 14.3% year over year to $904.5 million, representing 24.2% of sales compared with 21.1% in the prior-year quarter. The increase included incremental costs and investments associated with tariff refunds.
Adjusted EBITDA increased 32.1% to $609.1 million, while adjusted EBITDA margin expanded 400 basis points to 16.3%. Net earnings rose to $272.1 million from $51.4 million a year earlier.
Stanley Black's Cash Flow and Balance Sheet Strengthen
Stanley Black ended the quarter with cash and cash equivalents of $741.2 million compared with $280.1 million as of Jan. 3, 2026. Long-term debt was $4.70 billion, largely unchanged from the beginning of the year. Short-term borrowings and current maturities of long-term debt were eliminated.
Cash provided by operating activities increased to $658.5 million from $221.2 million in the year-ago quarter. Capital and software expenditures totaled $73.5 million, resulting in free cash flow of $585 million compared with $155.3 million a year earlier.
During the quarter, the company repurchased approximately 2.5 million shares for $250 million and paid cash dividends of $122.9 million. The board also approved a new $1 billion share repurchase authorization, effective through October 2029.
SWK Raises 2026 Earnings and Cash Flow Outlook
Management raised its 2026 GAAP earnings guidance to $5.45-$5.85 per share from the previous range of $4.60-$5.45. Adjusted earnings are now projected at $5.95-$6.25 per share, up from the earlier guidance of $5.20-$5.80.
The company also increased its free cash flow forecast to $1.0-$1.2 billion from $600-$800 million. The revised outlook incorporates tariff refunds received year-to-date and projected taxes and fees associated with the CAM divestiture.
For the fourth quarter, management expects net sales of approximately $3.6 billion and adjusted earnings of $1.45 per share. Adjusted gross margin is projected at 34-35%, while the long-term target remains 35-37%.
The company anticipates low-single-digit organic revenue growth for 2026, with approximately flat total sales. Management expects adjusted EBITDA margin improvement year over year, supported by continued productivity initiatives and operational execution.
Zacks Rank & Other Key Picks
The company currently carries a Zacks Rank #2 (Buy). Some other top-ranked stocks from the same space are discussed below.
Gates Industrial (GTES - Free Report) currently carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
GTES delivered a trailing four-quarter average earnings surprise of 6.6%. In the past 60 days, the Zacks Consensus Estimate for Gates Industrial’s 2026 earnings has increased 1.2%.
Applied Industrial Technologies (AIT - Free Report) presently carries a Zacks Rank of 2. It has a trailing four-quarter average earnings surprise of 3.6%.
The Zacks Consensus Estimate for AIT’s fiscal 2027 (ending June 2027) earnings has improved 0.5% in the past 60 days.
IDEX Corporation (IEX - Free Report) presently carries a Zacks Rank of 2. The company delivered a trailing four-quarter average earnings surprise of 7.6%.
In the past 60 days, the consensus estimate for IEX’s 2026 earnings has increased 1.5%.