Zacks Investment Research downgraded
Stanley Black & Decker, Inc.
(
SWK
) to a Zacks Rank #5 (Strong Sell) on January 26.
Why the Downgrade?
Following the release of fourth quarter and year 2012 financial
results on Jan 24, 2013; estimates for this industrial tool maker
witnessed a sharp fall. The Zacks Consensus Estimate for 2013
went down by 2.6% to $5.58 per share while that for 2014
plummeted 0.9% to $6.64 per share.
Stanley Black & Decker reported a 12.3% year-over-year
increase in its earnings, excluding one-time items in the
quarter; settling at $1.37 per share. Results came to a cent
above the Zacks Consensus Estimate of $1.36. In 2012, earnings
came in at $4.67, up 1.3% year over year but 5.1% below the Zacks
Consensus Estimate of $4.92. Revenue in the quarter improved 4.0%
year over year while gross margins went up 30 basis points to
36.0%.
Leaving aside the financial results, it was the outlook for 2013
that drew a great deal of attention. For the first quarter 2013,
earnings were estimated at 17.5% of full year earnings versus a
historical range of 18% -19%. For 2013, earnings were guided in
the range of $5.40-$5.65 per share.
Management anticipates that security and industrial markets in
the United States would remain weak in 2013, offsetting slight
gains expected from the housing market related recovery.
Additionally, instability in the European markets, decline in
industrial and security markets and flat construction market, are
likely to impact the company's business in the region.
Headwinds are also expected from a higher tax rate, with a 20-30
cent impact on earnings, and escalating interest expense, roughly
a 10 cent impact. All these along with trailing four quarters
average negative earnings surprise of 4.3%, leaves us with
Earnings ESP (Read:
Zacks Earnings ESP: A Better Method
) of -0.8% for the first quarter 2013, -0.2% for 2013 and -0.8%
for 2013.
Other Stocks to Consider
Other companies to watch out for in the sector are
Lindsay Corporation
(
LNN
) with a Zacks Rank #1 (Strong Buy) and
MRC Global Inc.
(
MRC
) and
Sandvik AB
(
SDVKY
); both have a Zacks Rank #2 (Buy).
LINDSAY CORP (LNN): Free Stock Analysis
Report
MRC GLOBAL INC (MRC): Free Stock Analysis
Report
(SDVKY): ETF Research Reports
STANLEY B&D INC (SWK): Free Stock Analysis
Report
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