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Stanley Black & Decker Declines 42% YTD: What's Hurting It?

Shares of Stanley Black & Decker, Inc. SWK have declined sharply since the beginning of 2020. We believe that the price decline primarily reflects investors’ reactions to the company’s exposure to external headwinds and end-market weaknesses. Also, nervousness related to the COVID-19 outbreak 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 6% (with the rank of 238) of more than 250 Zacks industries.

Year to date, the company’s shares have dipped 41.6% compared with the industry’s decline of 40% and the sector’s fall of 28.8%. Notably, the S&P 500 has declined 21.1% during the same period.




 

The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Factors Affecting the Stock

The rapid spread of the coronavirus is affecting the corporate world globally. Industrial companies in the United States are also badly impacted by the outbreak. Stanley Black & Decker, which is an industrial toolmaker, believes that the virus outbreak will adversely impact its revenue-generation capabilities in March and April. Also, the company communicated that necessary precautions (including work-from-home advice) are being taken to ensure the safety of its workers.

Beside the pandemic, the company’s exposure to various headwinds must have contributed to the bearish sentiments for the sock. As noted in January, weakness in automotive, industrial, oil & gas, and attachment tool markets are expected to adversely impact the Industrial segment in 2020. The segment’s organic sales are predicted to be negative to flat year over year.

Further, external headwinds — including forex woes and tariffs — are predicted to hamper earnings by 60-70 cents per share in 2020. Also, tax rate, financing costs and other woes are likely to lower earnings by 25 cents.

The impact of external headwinds will likely be heavy on the company’s first-quarter results. Along with this, flat organic sales will likely adversely impact earnings in the first quarter. Stanley Black & Decker expects first-quarter earnings to be 14% of yearly earnings, suggesting a decline of three percentage points from the year-ago reported figure.

Currently, the Zacks Consensus Estimate for the company’s earnings is pegged at $8.37 for 2020 and $9.34 for 2021, marking declines of 6.2% and 3.2% from the respective 60-day-ago figures. Notably, there were six downward revisions in estimates for 2020 and four for 2021 against one upward revision for both years in the past 60 days.

Stanley Black & Decker, Inc. Price and Consensus

 

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

However, focus on innovation, favorable e-commerce trend, growing recognition of brands (including Craftsman, Irwin and DEWALT) and synergies from acquired assets might support Stanley Black & Decker. Also, the company’s shareholder-friendly policies might be beneficial.

Stanley Black & Decker’s Performance Versus Three Industry Players

The company has underperformed three companies, belonging to the same industry, so fair in 2020. Three such stocks are Enerpac Tool Group Corp. EPAC, Lincoln Electric Holdings, Inc. LECO and Sandvik AB SDVKY, with respective year-to-date declines of 38%, 28% and 28%.

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Lincoln Electric Holdings, Inc. (LECO): Free Stock Analysis Report
 
Stanley Black & Decker, Inc. (SWK): Free Stock Analysis Report
 
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