We recently reiterated our Neutral recommendation on
industrial tool maker,
Stanley Black & Decker Inc.
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Long-term growth prospects seems bright for Stanley Black &
Decker as the company is well equipped to leverage benefits from
the increase in industrial tools demand globally as well as from
the rising exposure to emerging markets.
The mid-decade goal of Stanley Black & Decker includes
achieving $15 billion in sales, operating margin greater than
15%, deriving over 20% revenues from emerging markets, generating
15% return on capital/investment and 10 working capital turns.
The company is working hard to expand its organic growth and has
implemented six strategic initiatives towards this end. These six
initiatives are likely to contribute between $800 to $900 million
of annualized revenue growth and $200 million in operating income
in a 3 year term, with $150 million in 2013 and $350 million each
in 2014 and 2015.
In addition to these long-term aspects, Stanley Black &
Decker's recently reported second quarter 2013 results were
impressive. Earnings per share in the quarter grew 7.1% year over
year and surpassed the Zacks Consensus Estimate by 1.7%. Revenues
grew 11.8% on the back of solid organic revenue growth and
contributions from acquisitions. For 2013, management raised its
organic revenue growth guidance expecting higher core business
growth and benefits from organic growth initiatives. Higher
margins are also likely.
Also to reward its shareholders, board of directors of Stanley
Black & Decker approved a 2% or one cent increase in the
company's quarterly dividend rate, which now stands at 50 cents.
However, near-term concerns including higher negative foreign
currency translation impact, likely to be 20 cents on 2013
earnings, and headwinds from higher interest and tax rates which
cannot be ignored.
Considering all these, we prefer remaining on the sidelines for
Stanley Black & Decker currently.
Other Stocks in the Industry
Other companies that are worth mentioning in the industry
) - with a Zacks Rank #1 (Strong Buy),
Proto Labs, Inc.
) - with a Zacks Rank #2 (Buy) and
Lincoln Electric Holdings Inc.