• Revenue: $3.8 billion, down 5% year-over-year; organic revenue down 2%.
• Gross Margin: 30.5%, up 290 basis points from the previous year.
• Adjusted EBITDA Margin: 10.8%, up 140 basis points year-over-year.
• Adjusted Diluted EPS: $1.22 for the quarter.
• Free Cash Flow: Approximately $200 million in the third quarter.
• Debt Reduction: Reduced debt by $100 million.
• 2024 Full Year Adjusted EPS Guidance: Narrowed to $3.90 to $4.30.
• 2024 Free Cash Flow Guidance: Reiterated at $650 million to $850 million.
• Tools & Outdoor Revenue: $3.3 billion, down 2% organically.
• Industrial Segment Revenue: Declined 80% on a reported basis, organic revenue down 1%.
• DEWALT Growth: Sixth consecutive quarter of organic growth.
• Adjusted Segment Margin (Tools & Outdoor): 11.1%, up 180 basis points year-over-year.
• Adjusted Segment Margin (Industrial): 13.9%, up 170 basis points year-over-year.

• Warning! GuruFocus has detected 11 Warning Signs with SWK.

Release Date: October 29, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Stanley Black & Decker Inc (NYSE:SWK) achieved significant gross margin improvements, reaching 30.5% in Q3 2024, up 290 basis points from the previous year.
• The company generated strong free cash flow of approximately $200 million in Q3 2024, supporting debt reduction and capital allocation priorities.
• DEWALT brand experienced its sixth consecutive quarter of organic growth, indicating strong market demand and brand strength.
• The company is on track with its global cost reduction program, targeting $1.5 billion in savings by the end of 2024 and $2 billion by the end of 2025.
• Stanley Black & Decker Inc (NYSE:SWK) is investing in new growth initiatives, including a $30 million commitment by 2027 to support tradespeople and skills development.

Negative Points

• Overall revenue for Q3 2024 was $3.8 billion, down 5% compared to the previous year, with organic revenue declining by 2%.
• The company faced a weak consumer backdrop and mixed end market demand, particularly impacting the DIY and consumer segments.
• North American sales declined 4% organically, with challenges in the consumer and DIY markets affecting performance.
• The industrial segment experienced an 80% decline in reported revenue due to the divestiture of the infrastructure business.
• Global automotive production headwinds and a weak automotive market contributed to a decline in the industrial segment's performance.

Q & A Highlights

Q: Are you still confident of achieving a 35%-plus gross margin by the end of next year, and how should we think about sales and margin expansion in 2025? A: (Donald Allan, CEO) We expect the macro environment to remain soft and choppy into the first half of next year, likely resulting in flat to down sales initially. We are still targeting a 35% gross margin by the fourth quarter of next year, but the timing may vary due to headwinds. We are confident in achieving $2 billion-plus EBITDA, with the timing dependent on overcoming these headwinds.

Q: Can you clarify if the 35% gross margin target for year-end 2025 is still in place, and what macro conditions are needed to achieve this? A: (Patrick Hallinan, CFO) The 35% gross margin target remains our goal, but achieving it depends on overcoming current headwinds, such as automotive production issues. The pace of interest rate effects and auto corrections will significantly impact our ability to reach this target.

Q: What are the accelerated activities you are implementing to achieve cost savings, and what internal changes are needed to focus on organic growth? A: (Patrick Hallinan, CFO) We are accelerating efforts in sourcing, footprint, and platforming, with a focus on footprint actions to unlock savings next year. (Donald Allan, CEO) Internally, we are shifting towards a brand-centric culture, focusing on professional end users, and investing in the front end of the business to drive organic growth.

Q: How is Stanley Black & Decker performing in terms of market share in North America, particularly with DEWALT and other brands? A: (Christopher Nelson, COO) We are stable to slightly growing our market share, with DEWALT experiencing significant success. The professional segment is stronger than DIY, impacting brands like CRAFTSMAN more than DEWALT. We expect consumer strength to improve in the latter half of next year.

Q: What are you seeing on the cost side, particularly with materials and freight, and how is this impacting gross margins? A: (Patrick Hallinan, CFO) We anticipated slight material cost reductions and slight freight cost increases. Ground freight costs have been higher than expected, driven by labor and vehicle costs rather than fuel. We expect neutral price cost dynamics next year.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.