Stanley Black & Decker overcame a challenging demand environment to deliver a top and bottom line beat in its recent earnings report. However, the stock fell due to the company’s unchanged guidance.
Revenue for the quarter declined by 2% year-over-year to $3.87 billion, but still managed to surpass analysts’ expectations of $3.82 billion. Adjusted earnings per share also came in higher than expected, at 56 cents compared to the 54-cent estimate.
Despite the solid financial performance, Stanley Black & Decker’s stock fell more than 7% as the company’s guidance remained unchanged. Management cited the ongoing softness in the do-it-yourself (DIY) market due to higher interest rates, which have slowed home improvement projects.
The muted DIY demand, coupled with the company’s lackluster year-to-date performance, likely contributed to investor disappointment with the reiterated guidance. However, management highlighted the progress made in their cost-cutting initiatives, which they expect to generate $2 billion in annual cost savings by the end of 2025.
The company’s largest segment, Tools & Outdoor, saw sales growth of 1% in its flagship DeWalt power tools. However, hand tool sales were pressured by the muted consumer environment. Outdoor organic revenue increased by 2%, driven by demand for handheld cordless power equipment.
The Industrial segment, which consists primarily of fasteners, recorded a sales decline of 4%, partially offset by a 1% price increase. However, organic sales in the segment’s Engineered Fastening business grew by 5%, supported by strong demand in the aerospace and automotive industries.
Stanley Black & Decker’s adjusted gross margin improved to 29.0%, exceeding expectations and continuing a trend of improvements. The company attributes this to lower inventory destocking costs, supply chain transformation benefits, and reduced shipping costs.
Management maintained its 2024 guidance, expecting total company organic sales to remain relatively unchanged. Adjusted EPS is projected to be between $3.50 to $4.50. The company also reiterated its full-year adjusted free cash flow target of $600 million to $800 million.
Despite the soft demand environment, Stanley Black & Decker’s long-term outlook remains positive. The company’s cost-cutting measures and targeted growth investments are expected to support earnings expansion in the future. The company’s long-term adjusted gross margin target of 35% is seen as achievable through the $2 billion in annual cost savings it projects by the end of next year.
