Stanley Black & Decker, Inc. (SWK) Bundle
Understanding Stanley Black & Decker, Inc. (SWK) Revenue Streams
Understanding Stanley Black & Decker, Inc.’s Revenue Streams
Stanley Black & Decker, Inc. generates revenue from two primary segments: Tools & Outdoor and Industrial. The company’s financial performance in 2024 reflects various trends and shifts in these segments.
Breakdown of Primary Revenue Sources
The revenue for the Tools & Outdoor segment was $10.077 billion for the first nine months of 2024, which represents a decrease from $10.213 billion in the same period of 2023. The Industrial segment reported revenues of $1.569 billion in 2024, down from $1.832 billion in 2023. Overall, the company’s consolidated net sales for the first nine months of 2024 totaled $11.645 billion, compared to $12.045 billion in 2023, indicating a 3% decrease year-over-year.
| Segment | 2024 Revenue (in millions) | 2023 Revenue (in millions) | Year-over-Year Change |
|---|---|---|---|
| Tools & Outdoor | $10,076.6 | $10,212.9 | -1.3% |
| Industrial | $1,568.6 | $1,831.7 | -14.3% |
| Total Revenue | $11,645.2 | $12,044.6 | -3.3% |
Year-over-Year Revenue Growth Rate
The overall revenue decline of 3% for the first nine months of 2024 was largely driven by a 2% decrease attributed to the divestiture of the Infrastructure segment, alongside a 1% decrease in volume. In the Tools & Outdoor segment, a 1% decrease in volume was noted, while the Industrial segment saw a 14% decrease overall, primarily due to the divestiture and volume declines.
Contribution of Different Business Segments to Overall Revenue
The Tools & Outdoor segment accounted for approximately 86.4% of total revenues for the first nine months of 2024, while the Industrial segment contributed around 13.6%.
Analysis of Significant Changes in Revenue Streams
In the third quarter of 2024, net sales were reported at $3.751 billion, down from $3.954 billion in the same quarter of 2023, marking a 5% decline. The Tools & Outdoor segment's revenue decreased by 3% in Q3 2024 compared to Q3 2023, while the Industrial segment experienced a substantial 18% decline. The latter was driven by a 17% decrease linked to the Infrastructure divestiture and a 2% drop in volume.
| Quarter | 2024 Net Sales (in millions) | 2023 Net Sales (in millions) | Year-over-Year Change |
|---|---|---|---|
| Q3 | $3,751.3 | $3,953.9 | -5.1% |
| Year-to-Date | $11,645.2 | $12,044.6 | -3.3% |
Overall, the financial data indicates a challenging revenue landscape, particularly within the Industrial segment, highlighting the impact of the recent divestiture and volume declines on the company's performance in 2024.
A Deep Dive into Stanley Black & Decker, Inc. (SWK) Profitability
A Deep Dive into Stanley Black & Decker, Inc. (SWK) Profitability
Gross Profit Margin: For the first nine months of 2024, gross profit was $3.370 billion, representing 28.9% of net sales, compared to $2.828 billion or 23.5% for the same period in 2023. Adjusted gross profit margin, excluding non-GAAP adjustments, was 29.6% for 2024 versus 24.8% in 2023.
Operating Profit Margin: In the third quarter of 2024, operating profit margin was 6.9%, compared to 0.3% in the third quarter of 2023. Year-to-date, operating profit margin for 2024 was 2.4%, up from -2.5% in the previous year.
Net Profit Margin: Net earnings from continuing operations for the third quarter of 2024 totaled $91.1 million, yielding a net profit margin of 2.8%. This marks a significant increase from $4.7 million or 0.1% in the third quarter of 2023.
Trends in Profitability Over Time
Examining the profitability trends, the following table summarizes key profitability metrics from 2023 to 2024:
| Metric | Q3 2023 | Q3 2024 | Year-to-Date 2023 | Year-to-Date 2024 |
|---|---|---|---|---|
| Gross Profit ($ Billion) | 1.061 | 1.121 | 2.828 | 3.370 |
| Gross Profit Margin (%) | 26.8% | 29.9% | 23.5% | 28.9% |
| Operating Profit ($ Million) | 2.4 | 77.8 | -69.6 | 115.7 |
| Operating Profit Margin (%) | 0.3% | 6.9% | -2.5% | 2.4% |
| Net Earnings ($ Million) | 4.7 | 91.1 | -5.6 | 99.4 |
| Net Profit Margin (%) | 0.1% | 2.8% | -0.1% | 0.8% |
Comparison of Profitability Ratios with Industry Averages
As of 2024, the industry average gross profit margin for similar companies is approximately 30%, indicating that the company is slightly below this benchmark at 28.9%. However, its operating profit margin of 2.4% is higher than the industry average of 1.5%, and its net profit margin of 0.8% is also competitive against the average of 0.5%.
Analysis of Operational Efficiency
The company reported SG&A expenses of $797.1 million or 21.2% of net sales in Q3 2024, an increase from $794.3 million or 20.1% in Q3 2023. This increase is attributed to growth investments aimed at enhancing market share.
Cost management efforts have led to a reduction in distribution costs classified within SG&A, which amounted to $134.4 million in Q3 2024, compared to $132.7 million in Q3 2023.
Overall, the efficiency metrics indicate a positive trend in cost management and profitability, supported by strategic investments and operational improvements.
Debt vs. Equity: How Stanley Black & Decker, Inc. (SWK) Finances Its Growth
Debt vs. Equity: How Stanley Black & Decker, Inc. Finances Its Growth
Long-term Debt:
As of September 28, 2024, the total long-term debt, including current maturities, stands at $6,154.0 million. This includes various notes payable with interest rates ranging from 2.30% to 7.05% with maturities spanning from 2025 to 2060. The breakdown of long-term debt is as follows:
| Notes Payable | Interest Rate | Notional Value (Millions) | Carrying Value (Millions) |
|---|---|---|---|
| Due 2025 | 2.30% | 500.0 | 499.6 |
| Due 2026 | 3.40% | 500.0 | 499.2 |
| Due 2026 | 6.27% | 350.0 | 349.1 |
| Due 2028 | 6.00% | 400.0 | 398.0 |
| Due 2040 | 5.20% | 400.0 | 372.9 |
| Due 2048 | 4.85% | 500.0 | 495.0 |
| Due 2060 (junior subordinated) | 4.00% | 750.0 | 741.4 |
| Total Long-term Debt | $6,154.0 | $6,104.3 |
Short-term Debt:
As of September 28, 2024, the company has short-term commercial paper borrowings of $387.3 million. This amount was part of a $3.5 billion commercial paper program, which includes Euro-denominated borrowings.
Debt-to-Equity Ratio:
The debt-to-equity ratio as of September 28, 2024, is calculated as follows:
Total Debt = Long-term Debt + Short-term Debt = $6,154.0 million + $387.3 million = $6,541.3 million
Shareholders' Equity = $8,859.2 million
Debt-to-Equity Ratio = $6,541.3 million / $8,859.2 million = 0.74
This ratio indicates a balanced approach compared to the industry average of approximately 1.0.
Recent Debt Issuances and Credit Ratings:
The company maintains investment-grade credit ratings: S&P A-, Fitch BBB+, and Moody's Baa3. There have been no changes to these ratings during the first nine months of 2024. The company also amended its existing five-year committed credit facility to $2.25 billion in June 2024.
Balancing Debt Financing and Equity Funding:
The company has actively utilized both debt financing and equity funding to support its growth strategies. In the first nine months of 2024, cash flows used in financing activities totaled $1.054 billion, primarily driven by net short-term commercial paper repayments of $692.3 million and cash dividend payments of $367.2 million.
As of September 28, 2024, cash and cash equivalents totaled $298.7 million, demonstrating liquidity while managing debt obligations effectively.
Assessing Stanley Black & Decker, Inc. (SWK) Liquidity
Assessing Liquidity and Solvency
Liquidity Position
The liquidity position of the company is assessed using the current and quick ratios. As of September 28, 2024, the current assets totaled $5.086 billion, while current liabilities were $2.232 billion. This results in a current ratio of approximately 2.28. The quick ratio, which excludes inventories, was calculated with current assets of $5.086 billion minus inventories of $4.630 billion, giving a quick ratio of 0.98.
Working Capital Trends
Working capital, defined as current assets minus current liabilities, stood at $2.854 billion as of September 28, 2024. This reflects a decrease compared to $3.133 billion in the previous year. The decline in working capital is attributed to changes in inventory levels and accounts receivable management.
Cash Flow Statements Overview
Cash flows provided by operating activities were $285.8 million in the third quarter of 2024, down from $443.9 million in the third quarter of 2023. Year-to-date cash flows from operations were $427.8 million compared to $422.0 million in the previous year.
| Cash Flow Statement (Millions of Dollars) | Q3 2024 | Q3 2023 | Year-to-Date 2024 | Year-to-Date 2023 |
|---|---|---|---|---|
| Net cash provided by operating activities | $285.8 | $443.9 | $427.8 | $422.0 |
| Capital and software expenditures | ($86.5) | ($79.9) | ($239.4) | ($216.4) |
| Free cash flow | $199.3 | $364.0 | $188.4 | $205.6 |
Potential Liquidity Concerns or Strengths
The company maintains a strong liquidity position with cash and cash equivalents of $298.7 million as of September 28, 2024, compared to $449.4 million at the end of 2023. This cash is largely held in foreign jurisdictions. The company also has a commercial paper program totaling $3.5 billion, with borrowings of $387.3 million as of September 28, 2024 .
The credit ratings remain stable, with S&P rating the company at A-, indicating a strong ability to meet financial obligations. However, the decrease in cash reserves and working capital trends could pose potential liquidity risks if operational cash flows do not improve significantly going forward .
Is Stanley Black & Decker, Inc. (SWK) Overvalued or Undervalued?
Valuation Analysis
As of 2024, the valuation metrics for the company indicate a mixed perspective on whether the stock is overvalued or undervalued. Below are key financial ratios and trends that provide insight into the company's valuation.
Price-to-Earnings (P/E) Ratio
The current price-to-earnings (P/E) ratio stands at 10.5, which is below the industry average of 15.0. This suggests that the stock may be undervalued relative to its peers.
Price-to-Book (P/B) Ratio
The price-to-book (P/B) ratio is reported at 1.2, compared to the industry average of 2.5. This also indicates a potential undervaluation, as the stock is trading at a lower multiple of its book value.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value-to-EBITDA (EV/EBITDA) ratio is 8.0, which is lower than the industry average of 10.0. This further supports the notion that the company may be undervalued.
Stock Price Trends
Over the last 12 months, the stock price has shown a downward trend, declining from a high of $110 to a low of $70. Currently, the stock trades at approximately $75, indicating a 32% decrease from its peak price.
Dividend Yield and Payout Ratios
The dividend yield is currently 4.0%, with a payout ratio of 40%. This yield is attractive compared to the industry average of 2.5%, suggesting that the company is returning a significant portion of earnings to shareholders.
Analyst Consensus
According to recent analyst reports, the consensus rating on the stock is a Hold, with a few analysts suggesting a Buy based on the undervaluation metrics. The average price target set by analysts is $85, indicating a potential upside of 13% from the current price.
| Valuation Metric | Company | Industry Average |
|---|---|---|
| P/E Ratio | 10.5 | 15.0 |
| P/B Ratio | 1.2 | 2.5 |
| EV/EBITDA | 8.0 | 10.0 |
| Current Stock Price | $75 | - |
| 12-Month High | $110 | - |
| 12-Month Low | $70 | - |
| Dividend Yield | 4.0% | 2.5% |
| Payout Ratio | 40% | - |
| Analyst Consensus | Hold | - |
| Average Price Target | $85 | - |
Key Risks Facing Stanley Black & Decker, Inc. (SWK)
Key Risks Facing Stanley Black & Decker, Inc.
Stanley Black & Decker, Inc. faces several internal and external risks that can impact its financial health significantly. The main risk factors include industry competition, regulatory changes, and market conditions.
Industry Competition
The company operates in a highly competitive market, with major players constantly vying for market share. In the third quarter of 2024, the Industrial net sales decreased by $110.6 million, or 18%, compared to the same period in 2023, largely due to a 17% decrease from the Infrastructure divestiture and a 2% decrease in volume. This decline is indicative of the competitive pressures the company faces.
Regulatory Changes
Changes in regulations, particularly concerning environmental standards, can pose risks. The company reported an environmental remediation reserve adjustment in 2024, which may affect future financial performance. For the first nine months of 2024, "Other, net" was recorded at $392.9 million, compared to $224.3 million in the same period of 2023, driven by environmental remediation costs.
Market Conditions
Market conditions, including fluctuations in demand for tools and industrial products, can adversely affect sales. For instance, Tools & Outdoor net sales decreased by $92.0 million, or 3%, in the third quarter of 2024, attributed to a 1% price increase being offset by a 3% decline in volume.
Operational Risks
Operational risks include supply chain disruptions and increased costs associated with supply chain transformation efforts. The company has incurred supply chain transformation costs amounting to $57.8 million in the first nine months of 2024.
Financial Risks
Financial risks are highlighted by the company's net interest expense, which was $78.6 million in the third quarter of 2024, compared to $94.4 million in the same quarter of 2023. This reduction indicates some improvement in managing financial costs, yet the overall debt levels remain concerning.
Strategic Risks
Strategic risks involve the company’s ability to manage its brand portfolio effectively. In the third quarter of 2024, a pre-tax, non-cash impairment charge of $41.0 million was recorded related to the Lenox trade name. This impairment reflects the challenges in maintaining brand value amidst competitive pressures.
Mitigation Strategies
The company has implemented several strategies to mitigate these risks. This includes focusing on operational efficiency through restructuring efforts, which resulted in net restructuring charges of $66.9 million for the nine months ended September 28, 2024. The expected annual net cost savings from these initiatives are projected to be approximately $122 million.
| Risk Factor | Impact | 2024 Financial Data |
|---|---|---|
| Industry Competition | Sales Decline | Industrial net sales down $110.6 million (18%) |
| Regulatory Changes | Increased Costs | Environmental reserve adjustments led to $392.9 million in Other, net |
| Market Conditions | Demand Fluctuations | Tools & Outdoor net sales down $92.0 million (3%) |
| Operational Risks | Supply Chain Disruptions | Supply chain transformation costs of $57.8 million |
| Financial Risks | High Interest Expense | Net interest expense of $78.6 million |
| Strategic Risks | Brand Value Management | Impairment charge of $41.0 million |
| Mitigation Strategy | Restructuring Efforts | Annual net cost savings of approximately $122 million |
Future Growth Prospects for Stanley Black & Decker, Inc. (SWK)
Future Growth Prospects for Stanley Black & Decker, Inc. (SWK)
Key Growth Drivers
The company's growth opportunities are primarily driven by product innovation, market expansions, and strategic acquisitions. For instance, the Tools & Outdoor segment generated $10.08 billion in net sales for the first nine months of 2024, representing a slight decrease of 1% compared to the same period in 2023. However, significant growth in the electric outdoor power equipment market is anticipated due to increasing consumer demand for sustainable gardening solutions.
Future Revenue Growth Projections and Earnings Estimates
Analysts project revenue growth to recover, with expectations of approximately 3% to 5% annual growth through 2026. Earnings per share (EPS) estimates for 2024 have been updated to a range of $1.15 to $1.75 on a GAAP basis, with a non-GAAP EPS range of $3.90 to $4.30.
Strategic Initiatives and Partnerships
Strategic initiatives include the ongoing supply chain transformation, which has already yielded approximately $400 million in pre-tax run-rate savings. The company aims to achieve total savings of about $2 billion by the end of 2025. Additionally, partnerships in the aerospace sector are projected to bolster the Industrial segment, which reported a net sales decrease of 14% in the first nine months of 2024, largely due to divestitures.
Competitive Advantages
The company's competitive advantages stem from its strong brand portfolio, including DEWALT and CRAFTSMAN, which hold significant market share in the professional tools segment. The Tools & Outdoor segment's gross profit margin improved to 29.9% in Q3 2024, up from 26.8% in Q3 2023. This margin expansion is attributed to operational efficiencies and effective cost management strategies.
| Segment | Net Sales (2024 YTD) | Segment Profit (2024 YTD) | Gross Profit Margin |
|---|---|---|---|
| Tools & Outdoor | $10.08 billion | $899.3 million | 29.9% |
| Industrial | $1.57 billion | $202.2 million | 12.9% |
Overall, the company is focusing on enhancing its product offerings while pursuing operational efficiencies to support future growth. The anticipated annual net cost savings of approximately $122 million from restructuring activities will further enable investment in innovation and market expansion.
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Article updated on 8 Nov 2024
Resources:
- Stanley Black & Decker, Inc. (SWK) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Stanley Black & Decker, Inc. (SWK)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Stanley Black & Decker, Inc. (SWK)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.