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Stanley Black & Decker Declines 27% YTD: What's Affecting It?

Shares of Stanley Black & Decker, Inc. SWK have declined since the beginning of 2020. We believe that the price decline mainly reflects the adverse impacts of the pandemic. Also, exposure to external headwinds — including forex woes and tariffs — must have played spoilsport.

The New Britain, CT-based company belongs to the Zacks Manufacturing – Tools & Related Products industry, which, in turn, comes under the ambit of the Zacks Industrial Products sector. The industry is currently at the bottom 7% (with the rank of 237) of more than 250 Zacks industries.

Year to date, the company’s shares have dipped 27.2% compared with the industry’s decline of 26.2% and the sector’s fall of 19.6%. Notably, the S&P 500 has declined 8.2% during the same period.




 

The company currently carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Factors Affecting the Stock

The coronavirus outbreak is impacting Stanley Black & Decker’s operations and end markets. For instance, its organic sales in first-quarter 2020 decreased 7% year over year, while gross margin suffered from lower sales and the pandemic-related increase in manufacturing costs. The company believes that its second-quarter sales will be lowest in the year due to the virus outbreak-related headwinds.

The company suspended its projections for 2020, while also halted its share buyback and buyout activities for now. Also, measures are being taken to reduce capital expenditure. Based on scenario planning, the company’s organic sales might decline 35-45% in the second quarter and 15-30% in 2020.

In addition to the coronavirus woes, Stanley Black & Decker is exposed to risks (such as geopolitical uncertainties and unfavorable movements in foreign currencies) emanating from its international operations. Also, stringent trade relations due to tariffs are concerning. For 2020, tariffs and forex woes are expected to hurt the company’s results by $150 million.

Further, a highly leveraged balance sheet can be concerning for Stanley Black & Decker. Its long-term debt at the end of the first quarter was $4,662.6 million, suggesting a 46.8% increase over the previous quarter. Its total debt-to-total capital stood at 30.8% at the end of the first quarter versus 25.8% in the previous quarter. However, the company’s cash and cash equivalents were just $987.1 million at the end of the first quarter.

Currently, the Zacks Consensus Estimate for the company’s earnings is pegged at $5.03 for 2020 and $6.75 for 2021, marking declines of 35.2% and 25% from the respective 30-day-ago figures. Notably, there have been ten downward revisions in estimates for 2020 and nine for 2021 against no upward revision for both years in the past 30 days. In addition, the consensus estimate for the third quarter has declined 94.2% to 11 cents per share in the past month.

Stanley Black Decker, Inc. Price and Consensus

 

Stanley Black Decker, Inc. price-consensus-chart | Stanley Black Decker, Inc. Quote

However, efforts to innovate products, favorable e-commerce trends and growing recognition of products support Stanley Black & Decker’s results. Also, its cost-reduction actions are likely to yield $500 million in savings in 2020.

Stanley Black & Decker’s Performance Versus Three Peers

The company has underperformed three peer companies so far in 2020. Three such stocks are Lincoln Electric Holdings, Inc. LECO, Sandvik AB SDVKY and Allegion plc ALLE, with respective year-to-date declines of 18.8%, 19.9% and 23%.

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Lincoln Electric Holdings, Inc. (LECO): Free Stock Analysis Report
 
Stanley Black Decker, Inc. (SWK): Free Stock Analysis Report
 
Sandvik AB (SDVKY): Free Stock Analysis Report
 
Allegion PLC (ALLE): Free Stock Analysis Report
 
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