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SWK

Why Shares of Stanley Black & Decker Plunged 16% Today

Man using large saw.

What happened

Shares of construction equipment maker Stanley Black & Decker (NYSE: SWK) fell as much as 16% in trading Tuesday after reporting fourth-quarter earnings and 2019 guidance. At 3:50 p.m. EST, shares were still down 13.3% on the day.

So what

Quarterly revenue was up 5% to $3.6 billion on a 5% increase in volume. Price and acquisitions drove another 3% increase in revenue, but that was offset by a 3% decline in revenue from currency changes. Net loss was $66.7 million, or $0.45 per share, although adjusted earnings per share were $2.11. Both revenue and earnings per share were slightly ahead of expectations .

Man using large saw.

Image source: Getty Images.

What really disappointed investors was Stanley Black & Decker's guidance for 2019. The company said it expects adjusted earnings of $8.45 to $8.65 per share, which was notable lower than analysts' estimate of $8.79 per share.

Now what

Stocks are often priced based on estimates of future growth, and analyst estimates are usually a good benchmark for what investors are expecting. That's why guidance below estimates can lead to a decline in shares like we saw today. Stanley Black & Decker is still highly profitable and trades at just 14 times the midpoint of guidance, a decent price for a solidly run company. The dividend yield of 2% is also a nice benefit for investors. Long term, I think the company will continue to grow slowly, but the reset of expectations today is a shocker for investors.

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Travis Hoium has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .

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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