Stanley Black & Decker, Inc. SWK has failed to impress investors with its recent operational performance due to weakness in its Tools & Outdoor segment, persistent supply-chain constraints, raw material cost inflation and foreign-currency headwinds. These factors may adversely impede its earnings in the near term.
Let’s discuss the factors that might continue taking a toll on the firm.
Weak Segmental Performance: Softness in the Tools & Outdoor segment due to reduced retail and consumer demand is weighing on Stanley Black’s performance. The segment is witnessing lower volumes due to reduced consumer spending as a result of hiked interest rates and a spike in fuel prices. The company anticipates the segment’s organic revenues to decline by mid-to-high-single digits in 2022.
Steep Costs and Expenses: Cost inflation poses a threat to Stanley Black’s bottom line. In the first nine months of 2022, SWK’s cost of sales, and selling, general and administrative expenses jumped 28.6% and 15.6%, respectively, year over year. Supply chain disruptions are added concerns for the company, which are weighing on margins and profitability.
Forex Woes: Given the company’s vast international presence, it is exposed to currency translation risks. Forex woes hampered Stanley Black’s sales by 4% on a year-over-year basis in the third quarter 2022. The performance of its overseas business might be depressed by a stronger U.S. dollar in the quarters ahead.
Southbound Estimate Trend: In the past 60 days, the Zacks Consensus Estimate for 2022 earnings has been revised 3.3% downward.
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Due to these headwinds, shares of Stanley Black have lost 31% compared with the industry’s decline of 11.8% over the past six months.
Zacks Rank & Stocks to Consider
SWK currently carries a Zacks Rank #5 (Strong Sell).
Some top-ranked stocks in the Industrial Products sector are:
MRC Global Inc. MRC presently sports a Zacks Rank #1 (Strong Buy). MRC’s earnings surprise in the last four quarters was 103%, on average. You can see the complete list of today’s Zacks #1 Rank stocks.
In the past 60 days, MRC Global’s earnings estimates have increased 16.2% for 2022. The stock has gained 22.8% in the past six months.
Xylem Inc. XYL presently has a Zacks Rank #2 (Buy). XYL’s earnings surprise in the last four quarters was 13.3%, on average.
In the past 60 days, Xylem’s earnings estimates have increased 0.1% for 2022. The stock has gained 40.6% in the past six months.
EnerSys ENS delivered an average four-quarter earnings surprise of 2.1%. ENS presently carries a Zacks Rank of 2.
ENS’ earnings estimates have increased 0.6% for fiscal 2023 in the past 60 days. The stock has gained 22.3% in the past six months.
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