Stanley Black & Decker Holds Solid Potential, Runs Risks - Analyst Blog

On Apr 14, 2015, we issued an updated research report on Stanley Black & Decker, Inc.SWK . Based in New Britain, CT, the company manufactures tools and engineered security solutions on a global basis.

Stanley Black & Decker holds significant long-term upside potential, riding on a growth strategy of shifting its business portfolio toward favored growth markets, especially in the emerging countries. The company has also undertaken certain strategic initiatives to enhance its organic growth.

Moreover, Stanley Black & Decker remains committed toward rewarding its shareholders, aiming to achieving 30-35% dividend payout in the long run. In addition, the company expects its operating margin to exceed 15%, ROCE (return on capital employed) to reach 15% and working capital turns to be 10. Revenue from emerging markets is targeted at more than 20% of total revenue by 2016−2017.

However, certain near-term headwinds will likely offset these positives in the quarters ahead. For 2015, Stanley Black & Decker anticipates foreign currency movements to adversely impact revenue growth and earnings by 4−5% and 70−75 cents per share respectively.

Moreover, risks associated with rising interest expenses, uncertain economic conditions and stiff competition in all businesses might hurt Stanley Black & Decker's growth, going forward.

Over the last 60 days, the Zacks Consensus Estimate for Stanley Black & Decker has fell 0.7% to $5.99 for 2015 and 2.3% to $6.67 for 2016.

With a market capitalization of $15.1 billion, Stanley Black & Decker currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the machinery industry include RBC Bearings Inc. ROLL , Astec Industries, Inc. ASTE and AO Smith Corp. AOS . While RBC Bearings sports a Zacks Rank #1 (Strong Buy), both Astec Industries and AO Smith carry a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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