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Stock Wars: Snap-On Vs. Stanley Black & Decker

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Stock Wars: Snap-On Vs. Stanley Black & Decker

Benzinga’s weekly Stock Wars matches up two leaders in a major industry sector, with the goal of determining which company is the better investment.

This week, the duel is between a pair of tool manufacturers: Snap-On Inc. (NYSE: SNA) and Stanley Black & Decker Inc. (NYSE: SWK).

The Case For Snap-On: In 1920, Milwaukee entrepreneurs Joseph Johnson and William Seidemann launched the Snap-on Wrench Company. The start-up’s initial product line consisted of 10 sockets that could “snap on” to five interchangeable handles, and the company promoted this offering with the slogan “5 do the work of 50.”

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Over the years, the company relocated its headquarters across Wisconsin to Kenosha and has considerably expanded its product line to an assortment of high-end tools and equipment used across all segments of the transportation industry, including automotive, aviation, marine and railroad.

While many consumers may recognize the Snap-On name from its sponsorship of NASCAR’s Penske Racing Team, they will not find the company’s products in retail stores because Snap-On’s tools are only available from franchise dealers who sell directly to their customers.

This year’s major corporate development at Snap-On was an announcement in March of its acquisition for $200 million of Dealer-FX Group Inc., a Canadian developer of service operations software solutions for automotive original equipment manufacturer customers and their dealers.

The company has also offered new additions to its products including its Diagnostic Mobile Workcenter and a line of new master pressure tester sets.

According to the company’s second-quarter earnings report, Snap-On generated $1 billion in net sales during the quarter, up from $724.3 million in the same period one year earlier. This reflected a $316.9 million year-over-year organic sales gain, a $19.6 million increase of acquisition-related sales and $20.6 million of favorable foreign currency translation.

Within the company’s segments, its Commercial & Industrial Group posted second-quarter net sales of $350.5 million compared to $261.9 million one year earlier, while its Snap-on Tools Group saw net sales of $484.1 million versus $323.3 million last year. Its Repair Systems & Information Group accumulated net sales of $398.6 million compared to $245 million in the prior year.

Second-quarter net earnings were $208 million, or $3.76 per diluted share, compared to $101.2 million or $1.85 per diluted share one year earlier.

“We’re encouraged by our second quarter as Snap-on continued its upward trajectory, reaching significant heights in sales and operating earnings, and by our meaningful gains since the nadir of our pandemic-impacted activity during this period last year,” said Chairman and CEO Nick Pinchuk. “Our performance demonstrates the varied and abundant opportunities along our runways for growth and our ability to improve our operations throughout the challenges of the COVID environment.”

Snap-On shares opened for trading on Wednesday at $225.93, which is closer to its 52-week high of $259.99 than to its 52-week low of $138.94.

See Also: Previous columns in the Stock Wars series

The Case For Stanley Black & Decker: This New Britain, Connecticut-headquartered company traces its roots back to Stanley’s Bolt Manufactory, founded in 1843 by Frederick Trent Stanley, and his cousin Henry Stanley’s Stanley Rule and Level Company, founded in 1857. Curiously, although these family-owned businesses belonged to the same family, they didn’t merge until their 1920 union to form The Stanley Works.

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The 2010 merger with Black & Decker created the current company, which operates in the tools and storage, industrial, and security businesses.

Not unlike Snap-On, Stanley Black & Decker is a recognized name to auto racing fans — this year marks its seventh season as a sponsor of Joe Gibbs Racing and last month it signed a partnership deal to become the official Tools and Storage Partner of the McLaren Formula 1 team.

Also not unlike Snap-On, Stanley Black & Decker had a major acquisition this year – actually, it was announced earlier this week with the company’s agreement to acquire the remaining 80% ownership stake in MTD Holdings Inc., the manufacturer of outdoor power equipment including Cub Cadet and Troy-Bilt, for $1.6 billion. Stanley Black & Decker acquired a 20% stake in MTD in 2019.

The company has also spent much of 2021 polishing its image as a responsible corporate citizen: CEO Jim Loree joined the Council for Inclusive Capitalism, the company published its first consolidated Environmental, Social & Governance (ESG) report titled “A Force for Good,” and it promoted Joe Simms from vice president of human resources to the new position of chief diversity officer.

In its second-quarter earnings report, the company recorded $4.3 billion in net sales, up from $3.1 billion in the prior year. The company credited the 37% year-over-year boost to volume (+31%), price (+2%) and currency (+5%), which were partially offset by divestitures (-1%).

Among the company’s segments, its Tools & Storage group saw second-quarter net sales of $3.1 billion versus $635.1 million from the previous year, its Industrial segment generated $602 million compared with the prior year’s $62.4 million and its Security group tallied up $502 million compared with second-quarter 2020’s $36.9 million.

With second-quarter net earnings of $458.5 million, Stanley Black & Decker generated $2.87 in basic earnings per share and $2.81 in diluted earnings per share — second quarter 2020’s net earnings created $1.52 in both categories.

President and Chief Financial Officer Donald Allan Jr. heralded the second-quarter data by adding, “Our revised 2021 guidance calls for organic revenue growth of 16% to 18% and, at the midpoint, adjusted EPS expansion of 27% versus prior year and 37% versus 2019. The updated outlook reflects our strong first-half performance as well as improved visibility to demand in Tools & Storage.

“We continue to make investments to support our growth catalysts, increase capacity in our supply chain and drive our margin resiliency initiatives,” he added.

Stanley Black & Decker’s shares opened on Wednesday at $194.50, which is closer to its 52-week high of $225 than to its 52-week low of $152.19.

The Verdict: Wow, talk about two evenly matched companies. Both recorded superb second-quarter results thanks to intelligently run business operations and both stocks are trading closer to their 52-week highs. For the risk-averse investors, both companies would do well in a portfolio.

But for traders who like a bit of volatility and, perhaps, a dollop of drama in their activity, the one big difference between the companies is that Stanley Black & Decker offered updated guidance while Snap-On did not. While Snap-On is playing it safe as it regains its pre-COVID-19 pandemic mojo, Stanley Black & Decker is willing to go out on that proverbial limb to announce the best is yet to come.

For that sense of daring, this Stock Wars duel goes in Stanley Black & Decker’s favor, though it would be interesting to come back at the end of the fourth quarter to see if its guidance forecast came through and if Snap-On found the willingness to predict bigger and better for itself.

Photo: Cpl. Frank Cordoba, U.S. Marine Corps.

 

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