We issued an updated research report on Stanley Black & Decker, Inc. SWK on Nov 27, 2015. This machinery company is recognized worldwide for its tools and engineered security solutions.
Stanley Black & Decker remains committed toward expanding its businesses through development of innovative products, brand support and focus on overall cost competitiveness. During 2015−2018, the company 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 likely be greater than or equal to net income.
In addition, Stanley Black & Decker has undertaken certain strategic initiatives to drive organic growth. The initiatives are expected to contribute $850 million toward annualized revenue growth and $200 million in operating income over a 3-year period (2013–2015). Also, the company aims at rewarding its shareholders through dividend payments and share buybacks.
Despite these positives, exposure to certain near-term headwinds restricts Stanley Black & Decker’s growth momentum. The company’s geographical expansion exposes it to risks from foreign currency translation and geopolitical issues. For 2015, the company’s revenues are anticipated to face an adverse impact of $220 million from unfavorable foreign currency movements, scaling the higher end of the previous projection of $200−$220 million. Also, risks stemming from mounting expenses, huge debt level and active competition in all businesses limit Stanley Black & Decker’s prospects in the near term.
With a market capitalization of $16.3 billion, Stanley Black & Decker currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the sector include Encore Wire Corp. WIRE, iRobot Corporation IRBT and John Bean Technologies Corporation JBT. While Encore Wire sports a Zacks Rank #1 (Strong Buy), both iRobot Corporation and John Bean Technologies carry a Zacks Rank #2 (Buy).
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