Stanley Black & Decker: Longbow Dealer Surveys Show Better Than Expected Organic Growth

Stanley Black & Decker, Inc. SWK may report robust organic growth, backed by strong growth in power tool demand, Longbow’s David S. MacGregor said. The analyst maintained a Buy rating for the company, with a price target of $115.

Longbow’s 1Q survey of STAFDA dealers and power tool retailers suggested higher-than-expected, mid-single digits y/y sales growth for power tools in North America. The strong growth in power tool demand, against tough y/y comps, points towards that Stanley Black & Decker being able to report higher-than-expected organic growth for 1Q, analyst David MacGregor mentioned.

The 1Q16 organic growth estimate for Global T&S has been raised by 100 bps to 4 percent. The EPS estimate for 1Q16 has been raised by $0.02 to $1.15 to reflect above-consensus organic growth in T&S segment.

What’s New

MacGregor enumerated the factors that were changing:

1. A 3-5 percent y/y rise in North America professional power tool demand
2. A 5-7 percent y/y rise in consumer demand
3. DeWalt and Milwaukee gaining share at an accelerated pace, driven by premium product lines
4. A transition by laid off O&G/coal workers to the construction industry, increasing the investment in power tools
5. Limited promotional activity during 1Q ahead of Spring Black Friday at the homecenters
6. Both STAFDA and retail contacts expect high-single-digit growth in 2Q and 3Q, despite double-digit comps