Stanley Black & Decker (SWK Quick QuoteSWK - 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.

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In the past 60 days, the consensus estimate for IEX’s 2026 earnings has increased 1.5%.