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Category: Stock Market and Stanley Black & Decker
Date: 4 May 2020 Stock Price: $106.50 We take a look at the 1st quarter earnings release of their 2020 fiscal year of Stanley Black & Decker a supplier of hand tools, power tools and other related accessories. The group announced a $1 billion cost reduction plan in their latest earnings report.
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About Stanley Black & Decker
In 1843, Frederick Stanley started a small shop in New Britain, Connecticut, to manufacture bolts, hinges and other hardware of high quality from wrought iron. In 1910, Duncan Black and Alonzo Decker started their shop in Baltimore, Maryland, and six years later obtained the world’s first patent for a portable power tool. Over the years the two companies amassed an unparalleled family of iconic brands and trusted products. In 2010, they came together as Stanley Black & Decker, a leading global diversified industrial. Known for superior quality, continual innovation and rigorous operational discipline, we remain driven by a passion for excellence and a commitment to serve the builders, makers and protectors of the world.
Stanley Black & Decker, an S&P 500 company, is a diversified global provider of hand tools, power tools and related accessories, electronic security solutions, healthcare solutions, engineered fastening systems, and more
Stanley Black & Decker, an S&P 500 company, is a diversified global provider of hand tools, power tools and related accessories, electronic security solutions, healthcare solutions, engineered fastening systems, and more
Overview of Stanley Black & Decker's 1st quarter 2020 earnings report
The data below refers to the latest quarter unless specified otherwise:
- Net sales: $3.129 billion (down from $3.333 billion from the same quarter of the previous year)
- Net sales decreased by -6.1% over the last 12 months
- Cost of sales: $2.106 billion (down from $2.228 billion for the same quarter of the previous year)
- Operating expenses decreased by -5.5% over the last 12 months
- Net income: $133.2 million (down from $169.9 billion for the same quarter of the previous year)
- Diluted earnings per share: $0.88 (down from $1.13 for the same quarter of the previous year)
- PE ratio of Stanley Black & Decker: 30.2
- Dividend declared: $0.69
- Dividend yield: 2.6%
- Diluted weighted-average shares outstanding: 150.330 million (down from 147.863 million for the same quarter of the previous year)
- Cash and cash equivalents: $987.7 million
- Cash and cash equivalents per share: $5.97
- Cash and cash equivalents makes up 5.6% of Stanley Black & Decker's market capital
- Cash and cash equivalents makes up 4.3% of Stanley Black & Decker's total assets
- Inventories: $2.532 billion
- Inventories makes up 11.1% of Stanley Black & Decker's total assets
- Stanley Black & Decker's inventories grew by 12.3% over the last 12 months
- Accounts receivable: $1.681 billion
- Accounts receivable makes up 7.4% of Stanley Black & Decker's total assets
- Stockholders equity of Stanley Black & Decker: $8.953 billion
- Stockholders equity per share: $59.55
- Stanley Black & Decker is trading at 1.78 times its stockholders equity which is well outside the expected range of between 2 and 4 which most companies tend to trade at.
- For perspective the average firm on the S&P 500 has a price to book value of 3.34. Read more about the S&P500 here.
Stanley Black & Deckers management commentary on their 1st quarter 2020 earnings report
NEW BRITAIN, Conn., April 30, 2020 /PRNewswire/ -- Stanley Black & Decker (NYSE: SWK) today announced first quarter 2020 financial results.
Stanley Black & Decker's President and CEO, James M. Loree, commented, "We have focused our organization around four key priorities: (1) ensuring the health and safety of our employees and supply chain partners; (2) maintaining business continuity and financial strength and stability; (3) serving our customers as they provide essential products and services to the world; and (4) doing our part to mitigate the impact of the virus across the globe.
"In the first quarter, as we navigated through the early stages of one of the more challenging global crises the world has experienced, our team demonstrated great agility and resiliency in tackling the supply chain and initial demand impacts from the global pandemic as well as the carry-over headwinds from tariffs and currency. We are making critical decisions around those priorities every day to protect the company, our employees and all of our stakeholders. We are proud of how quickly and effectively our employees have responded and are confident in our ability to maintain the vitality, strength and sustainability of our 177 year old company."
Stanley Black & Decker's President and CEO, James M. Loree, commented, "We have focused our organization around four key priorities: (1) ensuring the health and safety of our employees and supply chain partners; (2) maintaining business continuity and financial strength and stability; (3) serving our customers as they provide essential products and services to the world; and (4) doing our part to mitigate the impact of the virus across the globe.
"In the first quarter, as we navigated through the early stages of one of the more challenging global crises the world has experienced, our team demonstrated great agility and resiliency in tackling the supply chain and initial demand impacts from the global pandemic as well as the carry-over headwinds from tariffs and currency. We are making critical decisions around those priorities every day to protect the company, our employees and all of our stakeholders. We are proud of how quickly and effectively our employees have responded and are confident in our ability to maintain the vitality, strength and sustainability of our 177 year old company."
$1 Billion Cost Reduction Program
The Company's cost reduction program, announced on April 2, is currently being implemented and is expected to deliver $1 billion in annualized cost savings with an approximate pre-tax charge of $160 million expected to be primarily recognized during 2Q 2020. Based on the extraordinary sacrifices that our employees are making at this time, Jim Loree and all of the Company's most senior executives, as well as all board members, have elected to forego 20% of their ongoing cash compensation at least for the remainder of the year.
The program's primary focus is to:
Liquidity & 2020 Outlook
Stanley Black & Decker believes it is in a strong financial position and has significant flexibility to navigate this volatile period:
In addition, the Company plans to reduce capital expenditures and temporarily suspend acquisition-related activity and share repurchases until the demand outlook is clearer. The near term priority for capital deployment will be focused on deleveraging in line with our strong, investment grade credit ratings. From a portfolio perspective, the Company is deferring the Security strategic review until after the environment stabilizes. On April 2nd, the Company withdrew its full year guidance as a result of the uncertain macro environment. The Company anticipates COVID-19 driven demand disruptions to negatively impact 2020 results versus prior guidance and will provide context on scenario planning for its businesses on today's earnings call.
Donald Allan Jr., Executive Vice President and CFO, commented, "In an environment that continues to change each day, we are doing everything we can to evaluate and prepare for the wide variety of scenarios that could occur in 2020 and beyond. We are continuing to suspend our guidance for now and are experiencing substantial revenue declines early in the second quarter which we currently expect will represent the trough quarter for the year. We have moved quickly and decisively in the initial steps we have taken so far – including our capital deployment focus and $1 billion cost reduction program – to ensure we maintain a strong operational foundation and balance sheet during this unpredictable period. We are confident that once through this event we will be in a position of strength to benefit from a recovery."
The Company's cost reduction program, announced on April 2, is currently being implemented and is expected to deliver $1 billion in annualized cost savings with an approximate pre-tax charge of $160 million expected to be primarily recognized during 2Q 2020. Based on the extraordinary sacrifices that our employees are making at this time, Jim Loree and all of the Company's most senior executives, as well as all board members, have elected to forego 20% of their ongoing cash compensation at least for the remainder of the year.
The program's primary focus is to:
- Adjust the Company's supply chain and manufacturing labor base to match the current demand environment
- Substantially reduce indirect spending (currently ~$1.7B annualized)
- Reduce staffing, compensation & benefits in a manner that ensures the Company is prepared for a demand recovery at the appropriate time
- Capture the significant raw material deflation opportunity
Liquidity & 2020 Outlook
Stanley Black & Decker believes it is in a strong financial position and has significant flexibility to navigate this volatile period:
- Maintains strong investment grade credit ratings
- Possesses approximately $1B of cash on-hand as of quarter end
- Manages a robust and highly rated commercial paper program ($3B program with $1.7B outstanding as of quarter end).
- Carries $3 billion of revolving credit facilities backed by a well-capitalized, diversified bank group
- Has the ability to generate additional cash proceeds of $750 million in the second quarter upon the successful remarketing of its Series C Convertible Preferred Stock, pursuant to its 2017 Equity Units Transaction
In addition, the Company plans to reduce capital expenditures and temporarily suspend acquisition-related activity and share repurchases until the demand outlook is clearer. The near term priority for capital deployment will be focused on deleveraging in line with our strong, investment grade credit ratings. From a portfolio perspective, the Company is deferring the Security strategic review until after the environment stabilizes. On April 2nd, the Company withdrew its full year guidance as a result of the uncertain macro environment. The Company anticipates COVID-19 driven demand disruptions to negatively impact 2020 results versus prior guidance and will provide context on scenario planning for its businesses on today's earnings call.
Donald Allan Jr., Executive Vice President and CFO, commented, "In an environment that continues to change each day, we are doing everything we can to evaluate and prepare for the wide variety of scenarios that could occur in 2020 and beyond. We are continuing to suspend our guidance for now and are experiencing substantial revenue declines early in the second quarter which we currently expect will represent the trough quarter for the year. We have moved quickly and decisively in the initial steps we have taken so far – including our capital deployment focus and $1 billion cost reduction program – to ensure we maintain a strong operational foundation and balance sheet during this unpredictable period. We are confident that once through this event we will be in a position of strength to benefit from a recovery."
Stanley Black & Decker (NYSE: SWK) stock price history
The image below, obtained from Google, shows the stock price history of Stanley Black & Decker (NYSE: SWK) over the last 5 years. And it's been a amazing time for Stanley Black & Decker. 5 years ago the stock was trading at around $103 and its currently trading at $106.50. That's a near zero return of 1% over the last 5 years.
The stock of Stanley Black & Decker is trading at closer to its 52 week low of $70.00 than it is to its 52 week high of $173.67 which to us its an indication that the short term sentiment and momentum of Stanley Black & Decker is slightly negative at this point in time
The stock of Stanley Black & Decker is trading at closer to its 52 week low of $70.00 than it is to its 52 week high of $173.67 which to us its an indication that the short term sentiment and momentum of Stanley Black & Decker is slightly negative at this point in time
Stanley Black & Decker (NYSE: SWK) stock price history over the last 5 years.
Recent Google search trends for SWK stock price
The graphic below shows the recent search trends for SWK stock price over the last 12 months in the United States as obtained from Google Trends. Searches for the stock price of SWK is rather erratic and not a lot of consistent searches over time
Recent coverage of Stanley Black & Decker
The extract below shows recent coverage of Amazon as obtained from Finance.Yahoo.com
Stanley Black & Decker (SWK) came out with quarterly earnings of $1.20 per share, beating the Zacks Consensus Estimate of $1.13 per share. This compares to earnings of $1.42 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of 6.19%. A quarter ago, it was expected that this tool company would post earnings of $2.16 per share when it actually produced earnings of $2.18, delivering a surprise of 0.93%.
Over the last four quarters, the company has surpassed consensus EPS estimates four times. Stanley Black & Decker, which belongs to the Zacks Manufacturing - Tools & Related Products industry, posted revenues of $3.13 billion for the quarter ended March 2020, missing the Zacks Consensus Estimate by 4.58%. This compares to year-ago revenues of $3.33 billion. The company has not been able to beat consensus revenue estimates over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Stanley Black & Decker shares have lost about 26.3% since the beginning of the year versus the S&P 500's decline of -9%.
What's Next for Stanley Black & Decker?
While Stanley Black & Decker has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?
There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions
Read the full article here
Stanley Black & Decker (SWK) came out with quarterly earnings of $1.20 per share, beating the Zacks Consensus Estimate of $1.13 per share. This compares to earnings of $1.42 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of 6.19%. A quarter ago, it was expected that this tool company would post earnings of $2.16 per share when it actually produced earnings of $2.18, delivering a surprise of 0.93%.
Over the last four quarters, the company has surpassed consensus EPS estimates four times. Stanley Black & Decker, which belongs to the Zacks Manufacturing - Tools & Related Products industry, posted revenues of $3.13 billion for the quarter ended March 2020, missing the Zacks Consensus Estimate by 4.58%. This compares to year-ago revenues of $3.33 billion. The company has not been able to beat consensus revenue estimates over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Stanley Black & Decker shares have lost about 26.3% since the beginning of the year versus the S&P 500's decline of -9%.
What's Next for Stanley Black & Decker?
While Stanley Black & Decker has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?
There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions
Read the full article here
DeWalt hand power tool
Stanley Black & Decker (NYSE: SWK) latest stock valuation
So based on the 1st quarter 2020 earnings report of Stanley Black & Decker (NYSE: SWK) what do we value Stanley Black & Decker stock at? Based on their latest earnings report and plan to implement significant cost savings our valuation models provide a target (full value) price for Stanley Black & Decker stock at $104.70 a stock (down from our 3rd quarter 2019 earnings report valuation of Stanley Black & Decker). We therefore believe the stock of Stanley Black & Decker is overvalued.
We usually recommend that long term fundamental or value investors buy into a stock at least 10% below our target (full value) price, which in this case is $104.70 We therefore believe a good entry point into Stanley Black & Decker is $94.20 or below. We expect the stock of Stanley Black & Decker to pull back from current levels to levels closer to our target price (full value price) in coming weeks and months.
We usually recommend that long term fundamental or value investors buy into a stock at least 10% below our target (full value) price, which in this case is $104.70 We therefore believe a good entry point into Stanley Black & Decker is $94.20 or below. We expect the stock of Stanley Black & Decker to pull back from current levels to levels closer to our target price (full value price) in coming weeks and months.
Next earnings release of Stanley Black & Decker
It is expected that Stanley Black & Decker will release their 2nd quarter 2020 earnings report in early August 2020