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Stanley Black & Decker Hits 52-Week High on Solid Prospects


Shares of Stanley Black & Decker, Inc. SWK reached a new 52-week high of $140.24 during its trading session on Jun 9. This apex improved upon the last 52-week high of $139.48 on Apr 24.

In the last six months, shares of the company rallied 17.57% outperforming the Zacks categorized Machinery Tools & Related Products industry’s gain of 17.23%.

On Jun 9, Stanley Black & Decker closed its trading session at $139.99, yielding a year-to-date return of roughly 23.1%. The trading volume for the session was approximately 1.13 million shares. Positive earnings estimate revisions for 2017 and 2018 along with an expected earnings growth rate of 10.10% for the next five years indicate the stock’s potential for further price appreciation.

Growth Drivers

In the last four quarters, Stanley Black & Decker’s financial performance had been impressive with an average positive earnings surprise of 5.38%. In fact, positive market sentiments after a solid first-quarter 2017 performance, with an 8.4% earnings beat, have led to roughly 2.19% gain in the company’s share price since Apr 21.

A sneak peek into the results reveals that improvement in profitability was achieved on the back of healthy business in the Tools & Storage and Industrial segments, synergistic benefits from acquired assets and improvement in margin profile.

Also, Stanley Black & Decker’s positive revision in its 2017 forecasts boosted market sentiments since release of the results. Earnings are predicted to come within $7.08−$7.28 per share range, above the previous projection of $6.98−$7.18. The revised guidance includes anticipated earnings accretion from Newell Tools and Craftsman Brand acquisitions and earnings dilution from disposition of Mechanical Security businesses as well as improved industrial businesses. Moreover, incremental benefits from organic revenue growth as well as cost and productivity actions are likely to support bottom-line growth.

Notably, as part of its strategic update released in May, Stanley Black & Decker revealed that it aims to become a well diversified industrial company with revenue generation of approximately $22 billion by 2022. Total revenue is anticipated to grow roughly 10−12% (CAGR), including organic sales growth of 4−6% and acquisition revenues of roughly $6−$8 million. Earnings per share are predicted to grow 10−12% or roughly 6−8% excluding acquisitions. Dividend payout is predicted to be 30–35% in the long run.

We believe solid near- and long-term prospects have led to positive revision in earnings estimates for Stanley Black & Decker. Over the last 60 days, the Zacks Consensus Estimate for the stock gained 2.3% to $7.21 for 2017 and 2.7% to $8.07 for 2018. These estimates represent year-over-year growth of 10.05% for 2017 and 11.93% for 2018.

Zacks Rank & Other Stocks to Consider

With a market capitalization of $21.4 billion, Stanley Black & Decker currently carries a Zacks Rank #2 (Buy). Some other favorably ranked stocks worth considering in the machinery industry include Kennametal Inc. KMT, Parker-Hannifin Corp. PH and Regal Beloit Corp. RBC. While Kennametal and Parker-Hannifin sport a Zacks Rank #1 (Strong Buy), Regal Beloit carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Kennametal’s earnings estimates for fiscal 2017 and fiscal 2018 were revised upward in the last 60 days. Also, the company’s average earnings surprise for the last four quarters was a positive 6.24%.

Parker-Hannifin’s average earnings surprise for the last four quarters was a positive 14.94%. Also, earnings expectations for fiscal 2017 and fiscal 2018 improved over the past 60 days.

Regal Beloit’s earnings estimates for 2017 and 2018 were revised upward in the last 60 days. Also, the company’s average earnings surprise for the last four quarters was a positive 1.48%.

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