The urge to be a “do-it-yourselfer” runs deep — and during the holiday season, power tools are perennially popular gifts. Making money is another universal need. Satisfying both primal urges is Stanley Black & Decker, Inc. (SWK), a toolmaker that’s an iconic brand name not only in America but throughout the world.
With the housing and construction markets now humming along, homeowners and professional builders are restocking their tool belts again, which bodes well for SWK stock.
Based in New Britain, Connecticut, Stanley Black & Decker’s products include tools and accessories, engineered fastening systems and security solutions. The company’s construction & do-it-yourself segment is its biggest generator of revenue, offering drills, measuring and leveling tools, planes, hammers, knives and blades, saws, and chisels.
This holiday season, stroll along the shelves of any Home Depot Inc (HD) or Lowe’s Companies, Inc. (LOW) and the colorful logo of Stanley Black & Decker pops out everywhere. More consumers are crowding those aisles, eager to open their wallets. Professional builders are in a mood to spend as well.
The housing recovery is on track and the once-beleaguered construction sector is on the rise. The U.S. Commerce Department reported that construction spending reached $971 billion in October, an increase of 1.1% from September.
These trends add up to powerful demand for power tools. The Freedonia Group, a research firm, predicts that world power tool demand will increase 4.5% annually through 2016 to $28.1 billion. Freedonia estimates that the Asia/Pacific region will be the fastest-growing market, followed by North America. In the U.S., gains will be driven by a rebound in housing starts and manufacturing activity — perfect conditions to propel SWK stock.
An accelerating U.S. recovery is fueling sales of SWK products, but the company also is expanding in developing countries, where newly affluent middle-class consumers are drawn to American brands and want to emulate Western do-it-yourself homeowners.
The company also is benefiting from massive infrastructure projects overseas, particularly in Asia and India. SWK recently bought a tool manufacturing facility in India and is building factories in China, in addition to expanding its existing production facilities in Brazil.
SWK Stock: Powering Up
Stanley Black & Decker reported third quarter 2014 earnings per share (EPS) of $1.55, compared to $1.39 in EPS in the same quarter a year ago, for an increase in EPS of 11.5%. EPS in the third quarter beat Wall Street’s consensus expectation of $1.44.
Earnings reached $236.7 million compared to $166 million in the same year-ago quarter, for a year-over-year increase of nearly 43%. Revenue came in at $2.87 billion, for a year-over-year increase of 5.2%. Stanley Black & Decker’ construction and do-it-yourself segment generated revenue in the third quarter of $1.45 billion, a year-over-year increase of 9.1%.
Analysts project that Stanley Black & Decker will report $5.56 in EPS for the full fiscal year; management expects 2014 EPS of $5.52 to $5.58.
The Bottom Line
As the holiday season gets into high gear, consumers are rediscovering their love affair with power tools. The TV show Home Improvement may be in syndication, but power tools haven’t lost their luster as coveted items on gift lists in America and around the world.
Founded in 1843, SWK remains synonymous with power tools and its products are ubiquitous in hardware stores. An entrenched position in the U.S and expansion into emerging markets should continue to fuel growth at the company well into the future.
As the company’s latest quarterly operating report and full-year fiscal guidance show, SWK stock is the right tool for building wealth.
As of this writing, John Persinos did not hold a position in any of the aforementioned securities.
