StanleyBlack & Decker (SWK) is slated to release its financial results for the second quarter of the fiscal year 2011 on Monday, July 18, after the market closes. The current Zacks Consensus Estimate for earnings per share (EPS) is $1.27, which represents a negative annualized growth of 2.12%.
With respect to earnings surprises over the trailing four quarters, Stanley Black & Decker outperformed the Zacks Consensus Estimate in all four quarters. The average earnings surprise was a positive 23.04%, implying that the company outperformed the Zacks Consensus Estimate by the same magnitude over the last four quarters.
First Quarter Highlights
Stanley Black & Decker reported encouraging results for the first quarter 2011 with earnings per share of $1.08, up from $0.70 in the year-ago comparable quarter. EPS also surpassed the Zacks Consensus Estimate of $1.00.
Net revenue for the first quarter jumped 89% year over year to $2.4 billion. The increase reflects a 71% growth from the Black and Decker acquisition, 7% from unit volume, and 9% from other acquisitions. Currency translation had a positive 2% impact on revenue growth.
Agreement & Magnitude of Estimate Revisions
In the last 30 days, of the analysts providing estimates for the stock, 2 analysts revised down their estimates for the second quarter while one lowered the estimate for the fiscal year 2012. None of the analysts revised their fiscal year 2011 estimates.
Despite the revision by analysts, lack of magnitude led to no change in the second quarter 2011 and fiscal year 2012 estimates. EPS estimate for the fiscal year 2011, however, increased by one cent from $5.15 to $5.16.
Our Take
Stanley Black & Decker's financial outlook for the fiscal year 2011 is encouraging. The company is likely to earn more and incur less of tax expenses. Net organic sales are expected to increase by 5%-6% while acquisitions are expected to add a 3% growth and revenue synergies to account for an additional 50 basis point increase. CDIY and Industrial segments are likely to deliver a mid single-digit organic growth in 2011, while a low single-digit growth is expected from the Security segment.
However, the outlook for the year gets dampened by the anticipated 100 basis point headwind from commodity cost inflation. The major impact of the cost inflation is expected to be felt in the second quarter. So, results in the quarter are likely to be soft compared sequentially due to higher costs.
We currently maintain a Neutral recommendation on the stock.
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