Stanley Black Seeks to Grow on Organic, Inorganic Strategies

We have issued an updated research report on industrial tool maker, Stanley Black & Decker, Inc. SWK on Jun 22. We believe that the company's immense growth potential backed by its organic and inorganic strategies makes it a sound investment option.

Its earnings are anticipated to grow roughly 10.10% in the next five years and increase 10.15% year over year in 2017 and 11.98% in 2018. The company's financial performance has been impressive, with an average positive earnings surprise of 5.38% for the last four quarters. Its share price has increased 32.58% in the last one year. Its last three-month rally of 8.69% surpassed the gain of 7.39% recorded by the Zacks categorized Machine Tools & Related Products industry.

Constant innovation of new products and development of existing ones within the Industrial, Security and Tools & Storage segments have proved beneficial for Stanley Black & Decker over time. For instance, healthy FLEXVOLT demand in the first quarter of 2017 drove Tools & Storage segment's sales in North America while automatic doors and healthcare-related products expanded Security sales in the region. In the long run, the company anticipates Industrial revenues to be within $5−$6 billion, Tools & Storage revenues within $12−$14 billion and Security revenues within $3−$4 billion.  

In addition, restructuring its business portfolio has been a priority for Stanley Black & Decker in the past few months. In Mar 2017, the company acquired the tools business of Newell Brands, known as Newell Tools and completed the acquisition of the Craftsman tool brand from Sears Holdings. Also, it sold a majority portion of its Mechanical Security businesses to dormakaba in February. Considering the earnings accretion from acquired assets and dilution from disposition as well as incremental contribution from organic sales growth, the company increased its earnings forecast for 2017 to $7.08−$7.28 per share from $6.98−$7.18.

By 2022, Stanley Black & Decker aims generating revenues of approximately $22 billion while revenue growth is anticipated to be in a 10−12% (CAGR) range, including organic sales growth of 4−6% and acquisition revenues of roughly $6−$8 million. Earnings per share are predicted to grow 10−12% or roughly 6−8%, excluding acquisitions. Dividend payout is predicted to be 30–35% in the long run.

We believe that above-mentioned positives clearly justify Stanley Black & Decker's Zacks Rank #2 (Buy). Some other stocks in the machinery industry worth considering include Kennametal Inc. KMT, Parker-Hannifin Corporation PH and Regal Beloit Corporation RBC. While Kennametal and Parker-Hannifin sport a Zacks Rank #1 (Strong Buy), Regal Beloit carries a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here.

Kennametal's earnings estimates for fiscal 2017 and fiscal 2018 were revised upward in the last 60 days. Also, the company's average earnings surprise for the last four quarters was a positive 6.24%.

Parker-Hannifin's average earnings surprise for the last four quarters was a positive 14.94%. Also, earnings expectations for fiscal 2017 and fiscal 2018 improved over the past 60 days.

Regal Beloit's earnings estimates for 2017 and 2018 were revised upward in the last 60 days. Also, the company's average earnings surprise for the last four quarters was a positive 1.48%.

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