SWK has put forth a plan to deal with the impact of COVID-19, which reads like a playbook companies in a similar position may wish to steal. The company announced on April 2nd a comprehensive approach to finding a way through the crisis, that it will be employing immediately.
The SWK stock price started moving up after the plan was released.
President and CEO, James M. Loree, described the overall goal of the plan. “This is one of the most challenging crises our world has ever experienced. We are in a strong position as we face today’s challenges and are taking the necessary actions now to protect our employees and the business while positioning the Company to thrive into the future.”
One of the mainstays of the new plan is a focus on cost cutting and efficiency in execution. SWK will be reducing indirect spending, which currently stands at approximately $1.7 billion, as well as right-sizing their supply chain and manufacturing base. The company has a substantial portion of its manufacturing capacity in China, which may be impacted by these moves.
Stanley will also be eliminating non-essential personnel in a move to further cut costs and align its supply function with the reduced demand accompanying the crisis. On a positive note, the company announced it will be taking advantage of the “significant raw material deflation opportunity” to substantially decrease input costs.
In addition to actions related to cost cutting, Stanley is also ring fencing its balance sheet to ensure the company is in solid financial shape for the duration of the crisis.
As part of this effort, the company believes it will maintain its strong investment grade credit rating, maintaining its substantial cash position, and “highly rated commercial paper program”.
SWK currently has a $3 billion revolving credit facility available, backed by a number of well-capitalized financial institutions. The company is confident the facility will be available, should the crisis take a turn for the worse.
Finally, the company can generate additional cash, if necessary, by way of a remarketing effort related to its series C convertible preferred stock.
In a move being emulated by a number of other companies, Stanley Black & Decker has withdrawn its 2020 guidance, and plans to update the financial community on projected earnings at its next conference call on April 30th. After trading from $170, down to almost $70, the stock has recently bounced to trade in the $112 area.
Donald Allan Jr., EVP and CFO, said the company has, “…stress tested our business for a wide variety of demand scenarios and have initiated the necessary actions and contingency plans to ensure we maintain a strong operational foundation and balance sheet during this unpredictable period.”
Steven Adams’s personal position in Stanley Black & Decker: none.
5G, Streaming TV, Internet-of-things, Artificial Intelligence, Automation will skyrocket once we're beyond this pandemic and economies around the world begin to recover. Here are 10 must-own the stocks to buy now before the real recovery starts.
Pandemic, stock market crash, economic recession, social unrest, geopolitical confrontation... 2020 will go down in history as a year of upheaval.
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