Stanley Black & Decker (SWK) has been trending higher since reporting in line Q4 earnings. Quarterly revenue rose 2%, while EPS came in at $2.18, rising 3% quarter-over-quarter.
Full year 2019 revenue was $14.4 billion rising 3% year-over-year. The company calculated losses from external sources, including tariffs and currency fluctuations, at $445 million. This resulted in EPS for the year of $8.40, a 3% gain over 2018.
President and CEO, James Loree said, given the unexpected costs encountered during the year, the company was very happy with the full year results, especially with the organic growth they were able to achieve.
Stanley Black & Decker closed two major transactions in 2019, at a capital cost of $900 million, and yet was still able to maintain a solid balance sheet. The company now has debt of only 2 times EBITDA, as it prepares to close on another recently announced acquisition of aerospace fastener manufacturer CAM.
From a geographic perspective, the company saw strong growth in North America and Europe, with each delivering 3% organic growth. But, emerging markets were a mixed picture, with Latin America in particular showing weakness.
Donald Allan, Stanley’s CFO, said, “The Latin American market pressure was most acute in Chile, Mexico, and Central America… [where] you are seeing the political environment or social disruption beginning to impact the business confidence and the underlying GDP.”
Bright spots for the company in the quarter included power tools and equipment, which grew 6% quarter-over-quarter, and the company’s security business, which came in at 4% growth in the midst of a turnaround for the business unit.
The security segment is in flux for Stanley Black & Decker, as Mr. Loree stated about the unit, “…we appear to be at an inflection point, with increasing positive momentum in organic growth, and a stable operating margin rate poised for accretion in 2020.”
But, now that the Security business has been stabilized, Loree continued, “We are confident in the value we are creating through this transformation regardless of whether we choose to retain or to monetize the asset at some point.” It would not be surprising to see a spinoff of the unit, as the company appears to be allocating capital to different goals, demonstrated by its recent M&A profile.
CFO Allan said the company is expecting EPS for 2020 in the range of $8.05 to $8.35 when the company takes out anticipated M&A, restructuring, and continued Security business turnaround costs. Allan said the company has calculated the benefit of the recently announced Phase One trade deal with China in its projections.
Steven Adams’s personal position in Stanley Black & Decker: none.
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