Facilities and indirect spending will be cut alongside organizational layers. Management should have taken many of these actions previously, but it probably held off when sales soared after mid-2020. To put the $2 billion worth of cost-saving measures into context, Stanley’s operating profit was $2.2 billion in 2021. During times of turbulence and uncertainty in the markets, even when markets are at all-time highs, many investors turn to dividend-yielding stocks.
Is Stanley Black & Decker Stock a Buy for 2023?
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- Throw in poor weather that hit sales of outdoor products (lawnmowers, trimmers, and the like), and it’s a perfect storm for the company.
- As discussed recently, Stanley and its industry peers need to improve the rate at which they turn over their inventory.
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- Facilities and indirect spending will be cut alongside organizational layers.
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The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities. Having started the year expecting adjusted earnings per share of $12-$12.50 in 2022, management in its most recent guidance projected $4.15-$4.65. In trading on Tuesday, shares of Stanley Black & Decker crossed above their 200 day moving average of $88.95, changing hands as high as $89.70 per share. Zacks Earnings ESP (Expected Surprise Prediction) looks to find companies that have recently seen positive earnings estimate revision activity.
Yet its medium- to long-term prospects look bright, and there’s a strong case for buying the stock and riding out the potentially bad near-term news facing the company. In that context, here’s a look at the crucial metric investors need to see before feeling fully confident in buying the stock. Tools and outdoor products manufacturer Stanley Black & Decker (SWK 4.42%) is one of the most intriguing stocks on the market today. Unfortunately, it’s down a whopping 55% this year, as just about everything has gone wrong for the company in 2022. In response to its difficulties and the need to radically restructure its supply chain to reduce susceptibility to future shocks, management launched a cost-cutting and restructuring plan. The aim is to cut costs by $1 billion by 2023 and by a total of $2 billion in three years.
As a reminder, a lower number is worse, as it means a slower rate of generating sales from inventory. As discussed recently, Stanley and its industry peers need to improve the rate at which they turn over their inventory. Stanley Black & Decker, a worldwide leader in Tools and Outdoor, announced today that its Board of Directors approved a regular second quarter cash dividend of $0.81 per common share. According to 9 analysts, the average rating for SWK stock is “Hold.” The 12-month stock price forecast is $101.11, which is an increase of 4.24% from the latest price. As an investor, you want to buy stocks with the highest probability of success.
Certain Zacks Rank stocks for which no month-end price was available, pricing information was not collected, or for certain other reasons have been excluded from these return calculations. Zacks may license the Zacks Mutual Fund rating provided herein to third parties, including but not limited to the issuer. Given the ongoing weakness in the housing market, there’s potential for bad news in the near term. To address its disappointing supply chain and operational performance, it launched a plan to cut costs by a whopping $2 billion in three years, with $1 billion of the cuts to be implemented in 2023 alone. Among the measures taken, Stanley will reduce its product range and number of suppliers, and fundamentally restructure its supply chain. Meanwhile, the sale of its electronic security and access technologies (automatic doors) businesses to Securitas and Allegion promised to help refocus the company on its core tools and outdoor products.
However, its fortunes changed in 2020 when widespread lockdowns and stay-at-home measures due to the pandemic boosted spending on home-related goods — great news for DIY tools makers like Stanley. See the combination of rising revenue and gross margin from 2020 to 2022. At the same time, Stanley’s leadership in the e-commerce market for tools proved beneficial during the period. If you can handle the potential for bad news over the near term, then Stanley might be a stock to buy outright. However, cautious investors will wait for evidence of stabilization in the inventory turnover figure before buying in.
Instead of seeing easing supply chains and moderating raw materials prices, Stanley suffered ongoing pressures and rising prices. Management, in turn, slashed full-year earnings guidance throughout the year. In addition, poor weather squeezed outdoor product sales, and worst of all, rising interest rates pressured consumer spending and the housing market — bad news for Stanley’s DIY tools sales.
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Still, cautious investors will wait to see evidence that Stanley is reducing its inventory effectively and its cost-cutting measures are bearing fruit before aggressively buying in. The company needs to increase the speed at which it sells through its inventory — in other words, its inventory turnover ratio, measured here as revenue divided by inventory. A low inventory turnover ratio implies relatively high inventory levels — that’s bad news because it means cash is tied up in holding inventory. It also suggests that Stanley may have to spend more on marketing or discount prices to reduce inventory, which hurts profitability.
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In a nutshell, Stanley was hit with a pincer movement on its margins and profitability in 2022. First, the supply chain and raw-material inflation issues extended far more than expected this year. Instead of a year of easing pressure (leading to margin expansion), cost pressures continued. Second, soaring inflation caused the Federal Reserve to hike interest rates, putting pressure on the housing market and do-it-yourself spending — hurting Stanley’s sales volumes. Throw in poor weather that hit sales of outdoor products (lawnmowers, trimmers, and the like), and it’s a perfect storm for the company. If you can close your eyes and ears to the likelihood of near-term bad news and you have confidence in management’s execution, then the stock looks attractive to investors.
The idea is that more recent information is, generally speaking, more accurate and can be a better predictor of the future, which can give investors an advantage in earnings season. Amidst a national skilled labor shortage, 88% of tradespeople in Orlando say that easier access to necessary tools would attract more workers to the construction industry The majority of tradespeople … Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams.
And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data. Nearly three quarters of respondents say the ideal pizza night is spent watching a movie or TV show The most common dipping sauces for pizza are garlic butter and ranch dressing When it comes to most … The industry with the best average Zacks Rank would be considered the top industry (1 out of 265), which would place it in the top 1% of Zacks Ranked Industries. The industry with the worst average Zacks Rank (265 out of 265) would place in the bottom 1%. An industry with a larger percentage of Zacks Rank #1’s and #2’s will have a better average Zacks Rank than one with a larger percentage of Zacks Rank #4’s and #5’s.