Stanley B&D Remains Underperform - Analyst Blog
01 February 2013 - 12:20AM
Zacks
We recently maintained an
Underperform recommendation on industrial tool maker,
Stanley Black & Decker, Inc. (SWK) based on
near-term headwinds surrounding the company.
Why
Underperform?
Long-term prospects remain bright
for industrial tool makers; as demand for tools is expected to
surge with the growth in the global economy, though currently we
see slow growth across nations.
Considering Stanley Balck &
Decker, a number of strategic moves undertaken recently, including
divestment of Hardware & Home Improvement Group and the
acquisition of Infastech, will work in favour of the company. HHI
divestment will free resources and enable the company to utilize
them for share repurchases, debt repayments and for reinvestment in
suitable acquisitions. Infastech will solidify the company’s
revenue generation capabilities in emerging markets.
These positives notwithstanding,
it’s the near-term concerns that keep us bearish on the stock.
Earnings per share of $1.37 in the fourth quarter surpassed the
Zacks Consensus Estimate by just a cent while earnings of $4.67 per
share for year 2012 lagged behind the Zacks Consensus Estimate by
5.1%.
Management’s outlook for 2013 was
disappointing. For the first quarter 2013, earnings were estimated
at 17.5% of full year earnings versus a historical range of 18%
-19%. Besides, security and industrial markets in the United States
are expected to remain weak in 2013, offsetting slight gains
expected from the housing market related recovery.
Additionally, decline in industrial
and security markets and flat construction market in Europe are
likely to impact the company’s business in the region. There
are apprehensions of headwinds from a higher tax rate and
escalating interest expense.
Weak outlook and fourth quarter
results pulled down earnings estimate for the stock. In the last 7
days the Zacks Consensus Estimate for 2013 has gone down 4.5% to
$5.49 while that for 2014 plummeted 4.2% to $6.36 per share.
Others Stocks to
Consider
Other stocks to watch out for in
the industry are Sandvik AB (SDVKY), holding a
Zacks Rank #1 (Strong Buy) along with MRC Global
Inc, (MRC) and Atlas Copco AB (ATLKY),
both holding a Zacks Rank #2 (Buy).
(ATLKY): ETF Research Reports
MRC GLOBAL INC (MRC): Free Stock Analysis Report
(SDVKY): ETF Research Reports
STANLEY B&D INC (SWK): Free Stock Analysis Report
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