Industrial tool maker Stanley Black & Decker, Inc. SWK reported better-than-expected results for third-quarter 2015. The company’s earnings from continuing operations came in at $1.55 per share, surpassing the Zacks Consensus Estimate of $1.52. Also, the bottom line surpassed the year-ago tally of $1.53 per share.
Revenues
Stanley Black & Decker generated net sales of $2,829.5 million, down 1.7% year over year. However, the top line outpaced the Zacks Consensus Estimate of $2,812 million. As revealed, organic revenues grew 6%, including volume gain of 5% and positive price impact of 1%, while unfavourable currency translation had a negative 8% impact on net sales.
Stanley Black & Decker reports revenue under three market segments. A brief discussion on the segment’s quarterly results is provided below:
The Tools & Storage segment generated revenues of $1,838.2 million, up 1.8% year over year and representing 65% of net revenue in the quarter. Industrial segment’s revenues, accounting for roughly 16.9% of net revenue, came in at $479.3 million, down 7.4% year over year. Revenues from the Security segment, roughly 18.1% of net revenue, decreased 7.7% year over year to $512 million.
Margins
In the quarter, Stanley Black & Decker’s cost of sales, as a percentage of revenues, came in at 63.7% versus 63.6% recorded in the year-ago quarter. Gross margin decreased 10 basis points (bps) to 36.3%. Selling, general and administrative expenses declined 5.1% year over year; while, as a percentage of revenues, it decreased 80 bps to 21.5%. Operating margin was up 70 bps to 14.8%.
Balance Sheet
Exiting third-quarter 2015, Stanley Black & Decker had cash and cash equivalents of $293.3 million, down from $391.9 million in the preceding quarter. Long-term debt (net of current portions) edged up 0.6% sequentially to $3,847.3 million.
Cash Flow
In the third quarter, Stanley Black & Decker generated net cash of $239 million from its operating activities, down from $249.1 million in the year-ago quarter. Capital and software expenditure were $68.5 million, up from $60.2 million in the year-ago quarter.
Normalized free cash flow was $190.9 million as against $218.4 million recorded in the year-ago quarter.
During the quarter, Stanley Black & Decker paid cash dividends of approximately $79.7 million, and repurchased shares worth $192.1 million.
Outlook
For 2015, Stanley Black & Decker increased its GAAP earnings guidance to $5.80−$5.95 from the previous projection of $5.70−$5.90 per share. The revision came on the back of the company’s improving operating efficiencies and incremental commodity deflation, partially offset by weak industrial market demand and unfavorable foreign currency movements. Free cash flow is predicted to be at least $1 billion.
With a market capitalization of $15 billion, Stanley Black & Decker currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the machinery industry include Barnes Group Inc. B, Graham Corporation GHM and Middleby Corp. MIDD. All these stocks carry a Zacks Rank #2 (Buy).
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