Stanley Black & Decker Braces For Tariff Impact, Lowers Outlook Despite Q1 Earnings Win

Stanley Black & Decker Inc. SWK shares are trading down after the company reported first-quarter 2025 results.

According to the earnings release:

• Sales declined 3% year over year (Y/Y) to $3.74 billion, beating the street view of $3.69 billion.
• Quarterly net sales were impacted by currency (-2%) and the Infrastructure divestiture (-2%), partly negated by volume growth (+1%).
• Gross profit increased to $1.12 billion from $1.11 billion a year ago, and the gross margin expanded by 130 basis points Y/Y to 29.9%.
• The adjusted gross margin was 30.4%, up 140 bps Y/Y, benefitting from supply chain transformation efficiency and new product launches.
• EBITDA margin expanded to 8.9% from 7.1% a year ago quarter, while adjusted EBITDA margin increased to 9.7% from 8.9% from the prior-year quarter.
• Adjusted EPS of 75 cents beat the analyst consensus of 66 cents.
• Tools & Outdoor net sales remained flat Y/Y, with 1% Y/Y volume growth offset by currency (-1%), driving 1% organic revenue growth. Tools & Outdoor segment margin was 8.8%, up 100 bps Y/Y, and adjusted segment margin rose 110 bps Y/Y to 9.6%, supported by supply chain transformation and product launches.
• Engineered Fastening (formerly known as Industrial) net sales declined 21% Y/Y, with a 1% decrease in organic sales. Margin dropped to 8.4% from 11.1% and an adjusted margin was 10.1% vs. 12.1%, primarily due to lower automotive volume.
• Operating cash outflow for the quarter was $420 million, compared to an outflow of $431 million a year ago.
• Stanley held $344.8 million in cash and cash equivalents as of March 29, 2025.

Outlook: In response to recent U.S. policy actions aimed at safeguarding gross margins, Stanley Black & Decker implemented a high-single-digit price increase for its U.S. Tools & Outdoor products in April and plans a second increase at the start of the third quarter.

The company is also accelerating a 12-24 month supply chain shift towards Mexico to reduce China tariff costs, leveraging their strong North American footprint.

The net negative 2025 EPS impact from tariffs, after price and supply chain adjustments, is estimated at around 75 cents.

For 2025, Stanley Black & Decker:

• Projects a 2025 GAAP EPS of $3.30 (+/- $0.15).
• Lowered its FY25 adjusted EPS guidance to $4.50, down (from the previous range of $4.75-$5.75) vs. the consensus estimate of $4.86.
• Continues to expect free cash flow for the year to meet or exceed $500 million.

Investors can gain exposure to the stock via VictoryShares Dividend Accelerator ETF VSDA.

Price Action: SWK shares are up 2.78% at $62.96 premarket at the last check Wednesday.

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