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Can Stanley Black & Decker Beat Analyst Earnings Estimates in 1Q18?



Stanley Black & Decker’s 1Q18 earnings per share estimates

Stanley Black & Decker (SWK) is expected to post adjusted EPS (earnings per share) of $1.35 in 1Q18, an increase of ~4.7% YoY (year-over-year). In 1Q17, SWK reported adjusted EPS of $1.29.

SWK’s projected increase in adjusted EPS could be driven by higher revenue growth and a better operational performance. SWK is set to benefit from tax cuts, and SWK estimates the tax rates for fiscal 2018 to be around 18%. SWK’s productivity measures could help to bring down SWK’s selling, general, and administrative (or SG&A) expenses as a percentage of sales. Analysts are expecting SWK’s 1Q18 SG&A expenses to be at $740.4 million, which is 23.8% of expected sales. In 1Q17, it reported SG&A of $684.7 million, representing 24.4% of sales, which is a 60-basis-point fall on a YoY basis.

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On the other hand, SWK’s cost of goods sold (or COGS) could have an adverse impact on adjusted EPS. In 1Q18, SWK’s COGS is expected to be at $2.0 billion, representing ~63% of the projected sales. In 1Q17, the company’s COGS was at $1.7 billion, representing 61.8% of sales, an increase of 120 basis points on a YoY basis.

Outstanding shares

In 4Q17, SWK’s outstanding shares rose due to the exercise of share issuances in 4Q16 associated with the company’s 2013 equity units. Analysts are expecting the number of outstanding shares to rise further in 1Q18 to 154.3 million. In 1Q17, SWK had outstanding shares of 151.5 million. The increase in outstanding shares could have an adverse impact on earnings per share.

Investors can hold SWK indirectly by investing in the iShares Edge MSCI Multifactor Industrials (INDF), which has invested 2.8% of its portfolio in Stanley Black & Decker. The other holdings of the fund include General Electric (GE), Boeing (BA), and 3M (MMM) with weights of 3.6%, 5.6%, and 3.7%, respectively, as of April 16, 2018.


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