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Stanley Black & Decker (SWK) Beats Q1 Earnings, Ups View

Industrial tool maker Stanley Black & DeckerSWK reported an impressive first-quarter 2016 results with both the top and bottom-line surpassing their respective Zacks Consensus Estimates.

Earnings from continuing operations were $1.28 per share or $1.32 per share excluding restructuring charges. The results came in above the Zacks Consensus Estimate of $1.19 per share and the year-ago tally of $1.07. The year-over-year increase was driven by operational efficiency, lower share count and lower restructuring expenses, more than offsetting the adverse impact of currency headwinds.

Stanley Black & Decker Inc. - Earnings Surprise | FindTheBest

Talking of the top-line, Stanley Black & Decker's net sales increased 1.6% year over year to $2,672.1 million. Also, the result surpassed the Zacks Consensus Estimate of $2,551 million. As revealed, organic revenues grew 5% as a result of favorable pricing and volume gains, offset by unfavorable currency translation impact of 3%.

Segmental Detail

Stanley Black & Decker reports revenue under three market segments. A brief discussion on the segment's quarterly results is provided below:

The Tools & Storage segment generated revenues of $1,707 million, up 4% year over year and represented 64% of net revenue in the quarter. Organic revenue grew 8%, while forex losses had a 4% negative impact.

Industrial segment's revenues, accounting for roughly 17% of net revenue, came in at $461 million, down 5% year over year. The fall was triggered by volume decline of 3% and currency impact of 2%.

Revenues from the Security segment, roughly 19% of net revenue, decreased 1% year over year to $504 million. Favorable price impact of 1% was more than offset by 2% negative impact of forex losses.

Margins

In the quarter, Stanley Black & Decker's cost of sales increased 2.3% year over year, representing 63.4% of net sales versus 63% in the year-ago quarter. Gross margin fell 40 basis points (bps) to 36.6%. Selling, general and administrative expenses inched up 0.8% year over year; while, as a percentage of revenues, it decreased 20 bps to 23.5%. Operating margin was down 20 bps to 13.1%.

Balance Sheet & Cash Flow

Exiting first-quarter 2016, Stanley Black & Decker's cash and cash equivalents were $352.2 million versus $465.4 million in the preceding quarter. Long-term debt (net of current portions) decreased 0.5% sequentially to $3,817.2 million.

In the quarter, Stanley Black & Decker used $93.1 million cash for its operating activities, compared with $197.5 million used in the year-ago quarter. Capital spending grew 41% year over year to $64.9 million. Normalized free cash flow was $158 million compared with $243.4 million recorded in the year-ago quarter.

During the quarter, Stanley Black & Decker paid cash dividends of approximately $79.6 million, and repurchased shares worth $361.4 million.

Outlook

For 2016, Stanley Black & Decker increased its earnings per share guidance to $6.20−$6.40 per share from $6.00−$6.20 projected earlier.

Organic revenue growth is expected to be within 3−4% range as compared with 3% anticipated earlier. The revised forecast is driven by improved Tools & Storage business as well as approximately $40 million lower currency headwinds.

Free cash flow conversion is predicted to be 100%.

With a market capitalization of $16.2 billion, Stanley Black & Decker currently carries a Zacks Rank #2 (Buy). Other stocks worth considering in the industry include Pioneer Power Solutions, Inc. PPSI , Kennametal Inc. KMT and Sandvik AB SDVKY . While Pioneer Power Solutions sports a Zacks Rank #1 (Strong Buy), both Kennametal and Sandvik AB carries a Zacks Rank #2 (Buy).

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STANLEY B&D INC (SWK): Free Stock Analysis Report

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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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