COVID-19 continues to spur demand for do-it-yourself projects, which has helped this firm post an 18.7% rise in sales in the most recent quarter.
A cost-cutting plan is also boosting the company’s earnings.
The stock trades at 19.9 times the company’s 2021 earnings forecast.
STANLEY BLACK & DECKER INC. (New York symbol SWK; www.stanleyblackanddecker.com) is one of the world’s largest makers of hand and power tools for consumers. Through your shares you tap top-selling brands DeWalt, Craftsman and Irwin—in addition to the Stanley and Black & Decker brands.
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In the fourth quarter of 2020, Stanley’s sales rose 18.7%, to $4.41 billion from $3.71 billion a year earlier. Sales jumped 24.4% at the Tools division (74% of the total) and gained 10.2% at the Industrial products business (15%). Those gains offset a 3.0% drop at the Security products division (11%).
Without one-time items, Stanley earned $523.6 million, up 58.5% from $330.4 million. On a per-share basis, its earnings gained 50.9%, to $3.29 from $2.18, on more shares outstanding.
The higher earnings are partly due to a successful cost-cutting plan, which includes job cuts and shrinking real estate holdings. The plan saved the company $500 million in 2020, and it expects an additional $125 million of savings in 2021.
The company’s balance sheet remains strong. In ended the quarter with cash of $1.38 billion, while its long-term debt of $4.25 billion is a low 13% of its market cap.
Growth Stocks: Dividend increases ahead as a pending acquisition looms
Stanley will probably use some of that cash to buy the remaining 80% of MTD Holdings that it doesn’t already own; it bought 20% of this firm in January 2019 for $234 million and has an option to buy the rest on July 1, 2021.
MTD makes a variety of outdoor power equipment including lawn mowers, snow throwers and chain saws. That purchase would add around $3 billion to its annual sales.
Excluding acquisitions and currency rates, Stanley now expects its sales in 2021 to rise between 4% and 8%.
The company also sees earnings per share rising to around 13% to $10.18 a share. The stock trades at a reasonable 19.9 times that forecast.
Stanley has increased its dividend each year for the past 53 years and continuously for 143 years. With the September 2020 dividend, the company raised your quarterly payment by 1.4% to $0.70 a share. The new $2.80 dividend yields 1.4%.
The company has raised its dividend by an average annual rate of 4.9% over the past five years. Its TSI Dividend Sustainability Rating is Above Average.
Recommendation in Dividend Advisor: Stanley Black & Decker Inc. is a buy.
Comments
Richard
The effects of Covid have put many home DIY projects on hold. What we are now experiencing in the cost of building materials doubling and in some cases tripling in price. I am anxious to see how many DIYers will put things off for another year. Wouldn’t this also have an effect on the business that flows through big box stores like Rona and Home Depot, which are retailers of Stanley products?
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The effects of Covid have put many home DIY projects on hold. What we are now experiencing in the cost of building materials doubling and in some cases tripling in price. I am anxious to see how many DIYers will put things off for another year. Wouldn’t this also have an effect on the business that flows through big box stores like Rona and Home Depot, which are retailers of Stanley products?
Thanks for your analysis. We believe the continuing pandemic will continue to spur demand for home renovation and so tools.