We recently maintained an Underperform recommendation on
industrial tool maker,
Stanley Black & Decker, Inc.
) based on near-term headwinds surrounding the company.
Long-term prospects remain bright for industrial tool makers;
as demand for tools is expected to surge with the growth in the
global economy, though currently we see slow growth across
Considering Stanley Balck & Decker, a number of strategic
moves undertaken recently, including divestment of Hardware &
Home Improvement Group and the acquisition of Infastech, will
work in favour of the company. HHI divestment will free resources
and enable the company to utilize them for share repurchases,
debt repayments and for reinvestment in suitable acquisitions.
Infastech will solidify the company's revenue generation
capabilities in emerging markets.
These positives notwithstanding, it's the near-term concerns
that keep us bearish on the stock. Earnings per share of $1.37 in
the fourth quarter surpassed the Zacks Consensus Estimate by just
a cent while earnings of $4.67 per share for year 2012 lagged
behind the Zacks Consensus Estimate by 5.1%.
Management's outlook for 2013 was disappointing. For the first
quarter 2013, earnings were estimated at 17.5% of full year
earnings versus a historical range of 18% -19%. Besides, security
and industrial markets in the United States are expected to
remain weak in 2013, offsetting slight gains expected from the
housing market related recovery.
Additionally, decline in industrial and security markets and
flat construction market in Europe are likely to impact the
company's business in the region. There are apprehensions
of headwinds from a higher tax rate and escalating interest
Weak outlook and fourth quarter results pulled down earnings
estimate for the stock. In the last 7 days the Zacks Consensus
Estimate for 2013 has gone down 4.5% to $5.49 while that for 2014
plummeted 4.2% to $6.36 per share.
Others Stocks to Consider
Other stocks to watch out for in the industry are
), holding a Zacks Rank #1 (Strong Buy) along with
MRC Global Inc,
Atlas Copco AB
), both holding a Zacks Rank #2 (Buy).
(ATLKY): ETF Research Reports
MRC GLOBAL INC (MRC): Free Stock Analysis
(SDVKY): ETF Research Reports
STANLEY B&D INC (SWK): Free Stock Analysis
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