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How Does SWK’s Stock Performance Stack Up against Competitors?

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Apr. 15 2016, Updated 1:07 p.m. ET

Stanley Black & Decker’s stellar record in earnings management

Stanley Black & Decker (SWK) has managed to beat consensus earnings per share estimates every time in the last eight quarters. Given that companies miss their sales estimates more than they miss earnings per share estimates, Stanley Black & Decker’s record in meeting sales consensus can be considered good too. The company has managed to beat consensus sales in six of the last eight quarters.

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Stanley Black & Decker’s stock performance in 1Q16

Stanley Black & Decker’s stock returns in the quarter underwhelmed the market. The stock increased from $104.87 at the beginning of January to $105.21 at the end of March and returned a paltry 0.3%. The stock witnessed a steep decline of almost 12% from mid-January until the end of February, which was due in part to panic across global markets and its negative guidance surprise. The stock reversed all its losses by the end of March. Investors invested in the broader market would have been better off with the 2.3% return from the S&P 500 Index in the first quarter of 2016.

Stock performance of competitors in 1Q16

Among competitors in the tools business, Snap-on (SNA) fared worse with a loss of 6.9% in the quarter. Similar to Stanley Black & Decker, Snap-on managed better-than-expected earnings, but its sales figures were far below estimates in 4Q15. Tyco International (TYC), a leader in the security solutions business, gained 15.4% over its price at the beginning of the year at $31.79. The remarkable outperformance of Tyco International’s (TYC) stock can be attributed to the fact that it entered a merger agreement with Johnson Controls (JCI) on January 25, 2016.

Investors interested in trading the industrial space can look into the Guggenheim S&P 500 Equal Weight Industrials ETF (RGI). Those interested in trading in dividend-based ETFs can look into the ProShares S&P 500 Dividend Aristocrats ETF (NOBL). Stanley Black & Decker (SWK) forms 2.1% of the total holdings in NOBL and 1.6% of the total holdings in RGI.

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