Stanley Black & Decker: Buy, Sell, or Hold?
Market-leading tools maker Stanley Black & Decker (SWK) has been paying dividends to shareholders for the past 54 consecutive years while maintaining a dividend-growth streak. But is it wise to...
Market-leading tools maker Stanley Black & Decker (SWK) has been paying dividends to shareholders for the past 54 consecutive years while maintaining a dividend-growth streak. But is it wise to buy the stock now despite the challenges faced by the company that are born from supply-chain disruptions and input price inflation? Read on to learn our view.
American tool and storage company Stanley Black & Decker, Inc. (SWK) in New Britain, Conn., reported mixed fourth-quarter results recently. While its sales for the quarter missed the consensus estimate by 8.7%, its $2.14 per share adjusted earnings beat the Street's estimate by 3.9%. Its board of directors has approved a regular first-quarter cash dividend of $0.79 per common share, extending the company's record for the longest consecutive annual and quarterly dividend payments among industrial companies.
The stock has declined 9.7% in price over the past month and 24.5% over the past nine months to close yesterday's trading session at $158.65. In addition, it is currently trading 29.5% below its 52-week high of $225, which it hit on May 10, 2021. Furthermore, concerns over supply chain issues and rising input costs make its near-term prospects uncertain.
Here is what could influence SWK's performance in the coming months:
Top Line Growth Does Not Translate into Bottom Line Improvement
For the fiscal fourth quarter, ended Jan. 1, 2022, SWK's net sales surged 2% year-over-year to $4.07 billion. Its total assets came in at $28.20 billion for the period ended Jan. 1, 2022, compared to $23.57 billion for the period ended Jan. 2, 2021. However, its net earnings were $328.20 million, representing a 29.8% year-over-year decrease. Also, its EPS came in at $1.99, down 28.9% year-over-year.
In terms of trailing-12-month net income margin, SWK's 10.82% is 68.6% higher than the 6.42% industry average. Its 3.32% trailing-12-month CAPEX/Sales is 27.9% higher than the 2.60% industry average. Furthermore, the stock's trailing-12-month ROCE, ROTC, and ROTA of 15%, 7.37%, and 5.99%, respectively, are higher than the 13.47%, 6.91%, and 5.16% industry averages.
In terms of forward P/CF, SWK's 7.16x is 48.9% lower than the 14.01 industry average. Likewise, its 13.33x forward non-GAAP P/E is 27.4% lower than the 18.37x industry average. And the stock's 12.51x and 1.24x respective forward EV/EBIT and non-GAAP PEG are lower than the 15.90x and 1.46x industry averages.
POWR Ratings Do not Indicate Sufficient Upside
SWK has an overall C rating, which equates to a Neutral in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. SWK has a C grade for Stability, which is consistent with its 1.39 beta.
SWK also has a D grade for Growth and Sentiment. This is justified because analysts expect its EPS to decline 45.4% for the quarter ending March 31, 2022.
SWK is currently trading below its 50-day and 200-day moving averages of $180.20 and $191.18, respectively, indicating a downtrend. Furthermore, it could continue retreating in the near term due to concerns over shipping difficulties and rising materials expenses. So, we think it could be wise to wait for a better entry point in the stock.
How Does Stanley Black & Decker (SWK) Stack Up Against its Peers?
While SWK has an overall POWR Rating of C, one might want to consider investing in the following Home Improvement & Goods stocks with an A (Strong Buy) or B (Buy) rating: Acuity Brands, Inc. (AYI), Masonite International Corp. (DOOR), and Duluth Holdings Inc. (DLTH).
SWK shares were unchanged in premarket trading Wednesday. Year-to-date, SWK has declined -15.89%, versus a -8.95% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock's price is the key approach that he follows while advising investors in his articles.
Entrepreneur Editors' Picks
Tory Burch Built a Brand Around Empowering Women. Now Her Foundation Is Furthering Her Mission: 'How Do We as a Company Have a Positive Impact on Humanity?'
This Founder Had to Play College Basketball in Men's Shorts and Shoes, So She Launched an Athletic Clothing Company Named After the Now 50-Year-Old Title IX Act
Is Beyoncé's 'Break My Soul' the Theme Song of the Great Resignation?
You're Probably Falling for All of Amazon Prime Day's Psychological Sales Tactics. A Marketing Professor Reveals Them — and How You Can Actually Get the Best Deal.
Comedian Paul Virzi: 'If You're Not Authentic, You Have Nothing'
Struggling to Come Up With Creative Ideas? Try Doing This.
Picking a Winning Emerging Brand Is How You Get Rich in Franchising. Here's How to Spot One.