Stanley Black & Decker, INC
(SWK)
Updated October 31st 2023
Key Metrics
Current Price:
$84
5 Year CAGR Esmate:
14.5%
Market Cap:
$12.8 B
Fair Value Price:
$101
5 Year Growth Esmate:
8.0%
Ex-Dividend Date:
11/30/23
% Fair Value:
84%
5 Year Valuaon Mulple Esmate:
3.7%
Dividend Payment Date:
12/19/23
Dividend Yield:
3.9%
5 Year Price Target
$148
Years Of Dividend Growth:
56
Dividend Risk Score:
A
Rerement Suitability Score:
A
Rang:
Buy
Overview & Current Events
Stanley Black & Decker is a world leader in power tools, hand tools, and related items. The
company holds the top global posion in tools and storage sales. Stanley Black & Decker is second
in the world in the areas of commercial electronic security and engineered fastening. Stanley
Works and Black & Decker merged in 2010 to form the current company, though the company
can trace its history back to 1843. Black & Decker was founded in Balmore, MD in 1910 and
manufactured the world’s first portable power tool.
On July 28
th
, 2023, Stanley Black & Decker announced it was raising its quarterly dividend 1.3% to
$0.81, extending the
company’s dividend growth streak to 56 consecuve years. The company is one of just 50 Dividend
Kings.
On October 27
th
, 2023, Stanley Black & Decker reported third quarter results for the period
ending September 30
th
, 2023. For the quarter, revenue decreased 4.1% to $3.95 billion,
which was $20 million less than expected. Adjusted earnings-per-share of $1.05 compared
favorably to $0.76 in the prior year and was $0.22 above esmates.
Companywide organic growth once again fell 4%. Organic sales for Tools & Outdoor, the largest
segment within the company, declined 5% due to weakness in consumer outdoor and DIY
categories. North America was down 5% while Europe was lower by 3%. U.S. point of sales
remain higher compared to 2019 levels. Emerging markets saw mid-single- digit growth when
excluding Russia. The Industrial segment decreased 4%, as an 6% improvement in Engineered
Fastening more than offset a 26% decrease for Aachment Tools. Adjusted gross margin
expanded ~300 basis points to ~28% due to cost controls. On a sequenal basis, the adjusted
operang margin improved ~400 basis points. The company’s cost reducon program remains on
track to deliver $2 billion in pre-tax savings by 2025. Stanley Black & Decker has achieved $875
million of cost savings since starng the program. Inventory was reduced by $300 million during
the quarter and has been reduced by $1.7 billion since the middle of 2022.
Stanley Black & Decker provided revised guidance for 2023 as well. The company expects
adjusted earnings-per-share in a range of $1.10 to $1.40, compared to $0.70 to $1.30 and $0.00
to $2.00 previously. However, we connue to believe that the company has earnings power of
$8.38 per share.
Growth on a Per-Share Basis
Year
2013
2020
2021
2022
2023
2028
EPS
$4.98
$9.04
$11.20
$4.62
$1.00
$12.31
DPS
$1.98
$2.78
$2.98
$3.18
$3.24
$3.58
Shares
1
156
157
159
148
150
145
Stanley Black & Decker’s earnings-per-share are flat over the last decade. The company
remained profitable over the Great Recession but saw earnings decline 15% in 2008 and 20%
in 2009. In the years since, Stanley Black & Decker has generally seen its earnings-per-share
rise consistently before 2022.
We now expect the company to grow earnings-per-share at a rate of 8% annually going forward as
Stanley Black &
Decker’s results are starng from a low base. Combined with the leading brands that the company
offers; this should help propel growth once supply chain constraints and higher inflaonary pressures
ease. That said, we have lowered our dividend growth forecast to 2% annually as the company works
through its present challenges.
Valuaon Analysis
Year
2013
2014
2015
Avg. P/E
16.3
16.2
17.1
Avg. Yld.
2.4%
2.3%
2.1%
Shares of Stanley Black & Decker have declined $18, or 17.6%, since our August 1
st
, 2023 update.
Based on our earnings power esmate for 2023, the stock now trades with a price-to-earnings
rao, or P/E, of 10.0. We reaffirm our five-year price target of 12 mes earnings, which is below
the long-term average of 17 mes earnings, given the ongoing struggles with the company. If
shares were to revert to our target P/E by 2028, then valuaon would be a 3.7% annual tailwind
to total returns over this period. Stanley Black & Decker’s current yield is one of the stock’s
highest over the past decade.
Safety, Quality, Compeve Advantage, & Recession Resiliency
Year
Payout
As seen during the 2008/2009-me period, Stanley Black & Decker is not recession-proof, but
investors who were willing to hold shares of the company from the 2008 lows have seen their
shares grow enormously. The company’s low payout rao does make it likely that dividends will
connue rising even through a serious economic downturn. Stanley Black & Decker’s key
compeve advantage is that its products are well-known and respected by customers. This was
why the company has been able to increase prices in certain product categories over the years
and not see a decline in sales.
Stanley Black & Decker has also been very acve in making strategic acquisions to help grow the
company. For example, adding the Crasman Brand has been a meaningful contributor to results
since the 2017 acquision.
Final Thoughts & Recommendaon
Stanley Black & Decker is now expected to produce an annual return of 14.5% through 2028, up
from 10.1% previously. This projecon stems from an 8% earnings growth, a starng yield of
3.9%, and a low single-digit contribuon from mulple expansion. Stanley Black & Decker
connues to work through the struggles in its business. Inventory has been lessened while the
cost savings program has had some benefit. We also note that the company has an impressive
dividend growth history and a solid yield we believe is safe. Therefore, Stanley Black & Decker
connues to earn a buy recommendaon.
Total Return Breakdown by Year
Income Statement Metrics
Year
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Revenue
10,890
11,339
11,172
11,594
12,967
13,982
14,442
14,535
15,617
16,947
Gross Profit
3,904
4,103
4,072
4,268
4,778
4,851
4,806
4,968
5,194
4,284
Gross Margin
35.8%
36.2%
36.4%
36.8%
36.9%
34.7%
33.3%
34.2%
33.3%
25.3%
SG&A Exp.
2,676
2,575
2,459
2,609
2,983
3,144
3,008
3,049
3,240
3,370
D&A Exp.
441
450
414
408
461
507
560
578
577
572
Operang Profit
929
1,267
1,364
1,450
1,510
1,392
1,515
1,616
1,832
639
Operang Margin
8.5%
11.2%
12.2%
12.5%
11.6%
10.0%
10.5%
11.1%
11.7%
3.8%
Net Profit
490
761
884
968
1,227
605
956
1,234
1,689
1,063
Net Margin
4.5%
6.7%
7.9%
8.3%
9.5%
4.3%
6.6%
8.5%
10.8%
6.3%
Free Cash Flow
528
1,005
871
839
226
769
1,081
1,674
144
(1,990)
Income Tax
69
227
249
262
301
416
161
41
61
(132)
Balance Sheet Metrics
Year
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Total Assets
16,535
15,849
15,128
15,635
19,098
19,408
20,597
23,566
28,198
24,963
Cash & Equivalents
496
497
465
1,132
638
289
298
1,381
142
396
Accounts Receivable
1,366
1,205
1,165
1,137
1,388
1,437
1,284
1,346
1,561
1,231
Inventories
1,473
1,563
1,526
1,478
2,018
2,374
2,255
2,737
5,447
5,861
Goodwill & Int. Ass.
10,600
10,027
9,626
8,994
12,284
12,441
12,859
14,094
13,491
12,978
Total Liabilies
9,655
9,337
9,269
9,261
10,793
11,568
11,454
12,500
16,605
15,249
Accounts Payable
1,553
1,579
1,533
1,640
2,021
2,233
2,088
2,446
3,439
2,344
Long-Term Debt
4,202
3,847
3,800
3,827
3,811
4,198
3,517
4,247
6,596
7,457
Shareholder’s Equity
6,799
6,429
5,812
6,367
7,552
7,086
7,906
9,689
11,591
9,712
LTD/E Rao
0.62
0.60
0.65
0.60
0.46
0.54
0.38
0.38
0.57
0.77
Profitability & Per Share Metrics
Year
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Return on Assets
3.0%
4.7%
5.7%
6.3%
7.1%
3.1%
4.8%
5.6%
6.5%
4.0%
Return on Equity
7.3%
11.5%
14.4%
15.9%
17.6%
8.3%
12.8%
14.0%
15.9%
10.3%
ROIC
4.6%
7.1%
8.8%
9.7%
11.0%
5.0%
7.7%
8.8%
10.1%
6.0%
Shares Out.
156
157
154
153
154
152
153
157
159
148
Revenue/Share
68.58
70.98
73.16
78.23
85.06
89.18
92.35
89.48
94.64
108.25
FCF/Share
3.32
6.29
5.70
5.66
1.48
4.90
6.91
10.31
0.87
(12.71)
Note: All figures in millions of U.S. Dollars unless per share or indicated otherwise.
Disclaimer
Nothing presented herein is, or is intended to constitute, specific investment advice. Nothing in this research report should be construed as a recommendation to follow any investment strategy
or allocation. Any forward-looking statements or forecasts are based on assumptions and actual results are expected to vary from any such statements or forecasts. No reliance should be placed
on any such statements or forecasts when making any investment decision. While The analyst has used reasonable efforts to obtain information from reliable sources, we make no
representations or warranties as to the accuracy, reliability or completeness of third-party information presented herein. No guarantee of investment performance is being provided and no
inference to the contrary should be made. There is a risk of loss from an investment in marketable securities. Past performance is not a guarantee of future performance.