Stanley Black & Decker, Inc. SWK is benefiting from its multi-year global cost-reduction program, which comprises a series of initiatives to resize the organization, reduce inventory and optimize the supply chain to improve its profitability and reposition it to pursue sustainable long-term growth.

Since its inception in mid-2022, this program has generated roughly $1.4 billion in pre-tax run-rate savings and reduced inventory by more than $2 billion. The program is expected to continue lowering costs over the next few years. The company expects to generate pre-tax run-rate cost savings of $2 billion by the end of 2025, with an adjusted gross margin of more than 35% in the long term.

Stanley Black has added multiple assets to its portfolio over time. The company acquired two major providers of outdoor power equipment (in December 2021) for $1.9 billion in aggregate. The acquisitions included an 80% stake in MTD Holdings and Excel Industries. The buyouts enhanced the company’s cordless electric outdoor power equipment offerings. With the growing popularity of home and outdoor products as well as electrification, Stanley Black’s acquisitions of MTD Holdings and Excel Industries strengthened its prospects in the outdoor products market, which is worth about $25 billion.

Stanley Black is committed to rewarding its shareholders through dividend payments and share buybacks. In the first nine months of 2024, the company paid $367.2 million in dividends, up 1.8% year over year. It also bought back shares worth $10 million in the same period. In July 2024, the company hiked its dividend by a penny to 82 cents per share (annually: $3.28 per share).

Downsides of SWK

Softness across both segments is a concern for SWK. The Tools & Outdoor segment is witnessing weakness owing to a soft DIY market and depressing demand for power tools. The Industrial segment is experiencing weakness due to the divestiture of the infrastructure business. Softness in the automotive end market, owing to headwinds in the global automotive OEM light vehicle production and constrained capex spending, is concerning.

Stanley Black is dealing with escalating expenses as management has stepped up investments in innovation and growth initiatives. This has increased SG&A as a percentage of sales. In the first nine months, for instance, SG&A increased approximately 1% year over year and 90 bps as a percentage of total revenues to reach 21.2%.

SWK currently carries a Zacks Rank #3 (Hold). In the past year, the stock has lost 14.9% against the industry’s 3.5% growth.

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