This tool and storage company just announced its third-quarter results, beating analysts’ EPS estimates by $0.16.
Stanley Black & Decker, Inc. (SWK)
From Dividend Advisor
Stanley Black & Decker, Inc. (Conservative Growth Payer Portfolio; Dividend Sustainability Rating: Above Average) is one of the world’s largest makers of hand and power tools for consumers. In addition to Stanley and Black & Decker, you tap top-selling brands DeWalt, Craftsman and Irwin.
Tools and storage products accounted for 70% of Stanley’s 2019 sales and 77% of its profits. That’s followed by Industrial products (17% of sales, 17% of profits) and building security systems (13%, 6%). The U.S. supplies about 60% of overall sales.
Stanley has increased its dividend each year for the past 53 years and continuously for 143 years. With the September 2020 dividend, the company raised its quarterly payment by 1.4% to $0.70 a share.
That payment looks safe. In the 12 months ended June 27, 2020, Stanley generated free cash flow (regular cash flow less capital expenditures) of $970 million. That easily covers its total dividend payments of $447 million.
Since 2002, the company has spent $10.1 billion on purchases of other businesses. The biggest of those was its $4.5 billion all-stock buy of rival toolmaker Black & Decker in March 2010. In 2017, it also paid $2.8 billion for two more businesses: the Craftsman hand and power tools business of Sears Holdings Corp., and the hand-tool businesses (Lenox and Irwin) of Newell Brands (New York symbol NWL).
New businesses are primarily why the company’s overall sales rose 29.3%, from $11.17 billion in 2015 to $14.44 billion in 2019. If you exclude costs to integrate new businesses and other unusual items, Stanley’s overall earnings jumped 40.0%, from $903.8 million in 2015 to $1.27 billion in 2019. Due to fewer shares outstanding, investors saw earnings per share improve at a slightly faster 41.9%, from $5.92 to $8.40.
Stanley continues to make acquisitions. In February 2020, it purchased Consolidated Aerospace Manufacturing. That firm supplies specialty fasteners and components to Boeing Co. (New York symbol BA) and other aircraft makers. The price was $1.46 billion, but Stanley will hold back $200 million until aviation regulators let Boeing’s 737 Max jetliner fly again. Those planes remain grounded following fatal crashes in Ethiopia and Indonesia.
In the quarter ended June 27, 2020, revenue decreased by 6.3% to $3.15 billion from $3.76 billion a year earlier. Sales were down due to lower volumes during COVID-19 lockdowns. Without one-time items, Stanley earned $247.0 million, or $1.60 a share, in the latest quarter; that’s down 38.3% from $400.3 million, or $2.66. On a per-share basis, its earnings fell 39.8% due to more shares outstanding.
Despite its acquisitions, Stanley’s balance sheet is sound. Its long-term debt as of June 27, 2020, was $4.7 billion. That’s a very manageable 19% of its market cap. The company also held cash of $859.8 million.
Stanley Black & Decker is a buy.
Patrick McKeough, Dividend Advisor, tsinetwork.ca, 888-292-0296, October 2020