We issued an updated research report on Stanley Black & Decker, Inc. SWK on Jun 24, 2015. The company, with a market capitalization of $16.4 billion, is well known over the world for its tools and engineered security solutions.
Stanley Black & Decker’s diversified customer base and solid product-line have strengthened its investment value over time. The company’s key end-markets include commercial, governmental and industrial markets. Moreover, the company continues to work diligently for improving its profitability through both organic and inorganic means. Also, rewarding its shareholders through dividend payments and share buybacks remain a priority for the company.
Within 2015−2018, Stanley Black & Decker targets to achieve approximately 10−12% revenue growth, including organic revenue growth of 4−6%. Operating margin is expected to be roughly 16%, while earnings per share are predicted to grow in mid-teens. Free cash flow will be greater than or equal to net income. Dividend payout is targeted to be 30–35%.
Despite these long-term positives, presence of headwinds in the near term remains a concern. International operations have exposed Stanley Black & Decker to risks arising from uncertain economic conditions, geopolitical issues and unfavorable movements of foreign currency exchange rates. The company anticipates $1.00−$1.10 per share dilution from adverse forex impact.
To add to the woes, higher expenses as well as huge debt levels, if left unchecked, will increase Stanley Black & Decker’s financial obligations and thereby, hurt its profitability growth. Currently, the Zacks Consensus Estimate for the stock is pegged at $6.02 per share for 2015 and $6.70 per share for 2016.
Stanley Black & Decker currently carries a Zacks Rank #3 (Hold). Some stocks in the machinery industry have been performing well, gaining high Zacks investment rankings. Better-ranked stocks include EnPro Industries, Inc. NPO, IDEX Corporation IEX and Luxfer Holdings PLC LXFR, all carrying a Zacks Rank #2 (Buy).
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