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What Drove Stanley Black & Decker’s Industrials Segment?

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Stanley Black & Decker’s industrials business meets expectations

Stanley Black & Decker’s industrials segment is its smallest business unit by sales contribution. The industrials unit contributed to 17.3% of SWK’s total 1Q16 sales. Overall revenues in the segment fell 5% to $461 million, led by an organic decline of 3%. Prices were flat in the quarter and organic declines were entirely due to a volume decline of 3%. Operating profits rose by 2% to $76 million, with high operating margins offsetting volume declines. Operating margins improved by 120 basis points to 16.5% on account of consistent productivity actions and cost control within the engineered fastening business.

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Engineered fastening business performance

The engineered fastening business, which makes up ~80% of total industrial unit sales, witnessed declining sales in the industrial (XLI) and electronics end markets, which was in line with expectations. The industrial and electronics end markets contribute to 25% and 12.5% of fastening sales, respectively. Organic declines were stemmed, primarily due to an uptick in the largest end market of the engineered fastening business, the automotive (FSAVX) market. Devoid of any numbers, the company stated that automotive fastening sales growth outpaced light vehicle production growth. The automotive unit is responsible for 56% of the total engineered fastening sales.

Infrastructure business performance

The infrastructure business, which forms the remaining 20% of industrials, delivered mixed results. Organic growth was flat as double-digit organic growth within the oil and gas business offset similar declines in the hydraulics unit. The company anticipates oil and gas growth to persist in the remaining quarters of 2016, with projects coming online later in the year and in 2017.

Investors interested in trading in dividend-based ETFs could look into the ProShares S&P 500 Dividend Aristocrats ETF (NOBL). Stanley Black & Decker (SWK) forms 2.1% of the total holdings in NOBL. Other holdings in NOBL include Nucor (NUE) at 2.5%, Dover (DOV) at 2.2%, and Illinois Tool Works (ITW) at 2.3%.

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