Stanley Black & Decker Shares Plunge On Q2 Miss, FY22 Guidance Cut

  • Stanley Black & Decker, Inc. SWK reported second-quarter FY22 revenue growth of 15.6% year-over-year to $4.39 billion, led by acquisitions in outdoor power equipment and price realization, missing the consensus of $4.77 billion.
  • Adjusted EPS decreased to $1.77 compared to $2.81 in 2Q21, missing the consensus of $2.12.
  • The gross margin was 27.5% compared to 35.8% in 2Q21, and the adjusted gross margin was 27.9%, down from 35.9% last year.
  • Gross margin was down as price realization was more than offset by commodity inflation, higher supply chain costs, and lower volume.
  • The operating profit declined by 40.4%, and the margin for the quarter was 8.1%, a decrease from 15.6% in 2Q21. The adjusted operating margin was 9.2%, down 700 bps.
  • Stanley Black & Decker's cash used in operating activities year-to-date was $(1.68) billion, compared to cash provided of $286.8 million a year ago. Free cash outflow was $(1.97) billion.
  • Stanley Security and Access Technologies Divestitures both closed in July 2022, with total cash proceeds of $4.1 billion, reducing debt balances in Q3.
  • "While the macroeconomic environment – including inflation, rising interest rates and significantly slower demand in late May and June – drove most of the challenges we faced this quarter, these headwinds underscore the need to accelerate our strategic transformation. As the softening of the demand environment accelerated rapidly during the last portion of the quarter, we began taking immediate corrective cost actions, which we are continuing to implement," commented CEO Donald Allan.
  • Inventory at the end of the 2Q22 was $6.6 billion, up ~$400 million compared to 1Q22.
  • FY22 Outlook: SWK revised the adjusted EPS outlook to $5.00 - $6.00 (from $9.50 - $10.50) vs. consensus of $9.72.
  • It expects a free cash flow of $0.4 billion - $1 billion in the back half, including tax payments of $0.5 billion - $0.6 billion associated with Security divestitures.
  • SWK expects lower second half revenue, primarily driven by slowing consumer demand in Tools & Outdoor and moderated expectations for a price.
  • Price Action: SWK shares are trading lower by 15.7% at $99.00 during the premarket session on Thursday.
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