We recently maintained an Underperform recommendation on
industrial tool maker,
Stanley Black & Decker, Inc.
Of late, the company made a number of strategic moves; of
which divestment of Hardware & Home Improvement Group and the
acquisition of Infastech are of considerable importance. The
long-term opportunities from HHI were found inconsistent with the
objectives of the whole company. Resources out of this business
sale, roughly $1.3 billion, will be used for share repurchases,
debt repayments and for reinvestment in suitable
Besides the strategic decision of HHI selling, the company
also agreed to acquire Hong Kong based leading manufacturer and
supplier of specialty engineered fastening technologies,
Infastech. The acquisition is likely to enhance Stanley's revenue
generation capacity, especially in the Asia-Pacific region.
Notwithstanding these positives, certain concerns have made us
maintain an Underperform recommendation on the stock.
Stanley Black & Decker's third quarter results disappoint
us as the company's earnings, although grew 5.3% year over year,
fell short of our estimate of $0.05 per share. Revenue grew
largely on the back of benefits from acquisitions, while currency
translation still continued to play a negative role. Organic
revenue growth was flat as European operations still
underperformed and are expected to remain a drag in the quarter
ahead. Management also revised down its guidance for 2012 owing
to these factors.
The current Zacks Consensus Estimate for the fourth quarter of
2012 is $1.45, representing a year-over-year increase of 6.4%.
Estimates for years 2012 and 2013 are $5.26 and $6.03, reflecting
annual growth of 0.3% and 14.7%, respectively.
Stanley Black & Decker manufactures tools and engineered
security solutions across the globe. The stock currently bears a
Zacks #5 (Strong Sell) Rank while its prime competitors
) has a Zacks #4 (Sell) Rank and
) has a Zacks #2 (Buy) Rank.
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