Stanley Black & Decker Has Enough Catalysts To Fuel Superlative Earnings Growth

Morgan Stanley said in a note it is now persuaded that Stanley Black & Decker, Inc. SWK has enough catalysts to keep its earnings growing at a premium to the broader EE/Multi-Industry group.

Accordingly, the firm upgraded shares of Stanley Black & Decker from Equal Weight to Overweight and lifted its price target from $154 to $169.

At time of writing, shares were rallying 1.77 percent to $153.61.

Analyst Nigel Coe believes the company should continue to drive outsized returns, with continued execution on breakthrough initiatives through FlexVolt and new projects. Additionally, the analyst expects the company to benefit from the launch of Craftsman into Big Box and e-channel markets in the second-half of 2018, and potential revenue synergies from acquisitions as part of the Vision 2022 framework.

Morgan Stanley said margin expansion at the company is sustainable, with historical forex headwinds abating and commodity inflation expected to moderate. The firm sees scope for margins to continue to expand at about 40 basis points per annum through 2021, cresting above the prior peak of 15.7 percent in 2010 by 2019.

While the firm views U.S. dollar strength and continued commodity inflation as key risks, it said it sees more upside to its $246 bull case, driven by new breakthrough initiatives and M&A.