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Stanley Black & Decker Stock Falls More than 15% on Weak Outlook

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SWK’s performance

Today, Stanley Black & Decker (SWK) posted its fourth-quarter earnings results. The company posted adjusted EPS of $2.11 on revenue of $3.63 billion, outperforming analysts’ EPS expectation of $2.10 and their revenue estimate of $3.62 billion.

Despite its strong performance in the fourth quarter, the company’s stock fell due to the weak guidance it provided for 2019. Management expects Black & Decker’s adjusted 2019 EPS to be in the range of $8.45–$8.65, lower than analysts’ expectation of $8.79. As of 10:28 AM EST on January 22, Stanley Black & Decker was trading at $117.33, a fall of 15.9% from its previous day’s closing price.

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Year-over-year revenue performance

Year-over-year, Stanley Black & Decker’s revenue rose 4.9% to $3.63 billion. This volume growth contributed 3% to the company’s total revenue growth, while acquisitions and pricing added 2% and 1%, respectively. However, some of the growth in the company’s revenue was offset by unfavorable currency rates, which negatively impacted its revenue by 3.0%.

During the quarter, the company’s adjusted EPS fell 3.2% from $2.18 in the fourth quarter of 2017. The contraction in the company’s gross margin and its higher effective tax rate lowered its EPS, which was partially offset by lower selling, general, and administrative expenses and revenue growth.

Outlook

For 2019, Stanley Black & Decker expects its adjusted EPS to be in the range of $8.45–$8.65, which represents a rise of 3.7%–6.1% from $8.15 in 2018. The company’s management expects organic growth, its cost-reduction program, and its lower share count due to share repurchases to drive its adjusted EPS in 2019. However, incremental tariffs, commodity inflation, and higher interest expenses are expected to offset some of the growth in its EPS.

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