Stanley Black & Decker (SWK) is slated to release its third quarter 2010 results on Wednesday, October 20. The current Zacks Consensus Estimate for the third quarter earnings per share (EPS) is 89 cents, representing an annualized growth of 14.94%.
With respect to earnings surprises, Stanley Black & Decker outperformed the Zacks Consensus Estimate in the trailing four quarters. The average earnings surprise was a positive 31.28%, implying that the company has outdone the Zacks Consensus Estimate by the same magnitude over the last four quarters.
Second Quarter Highlights
Stanley Black & Decker’s second quarter earnings from continuing operations were $1.03 per share, up 87.3% compared with 55 cents in the comparable quarter of 2009. The quarter’s EPS surpassed the Zacks Consensus Estimate of 77 cents.
Net income soared to $170.1 million from $43.7 million in the second quarter of 2009 as growth in revenue more than offset higher expenses.
Net revenue in the second quarter increased 157.4% year over year to $2,365.6 million versus $919.2 million in year-ago quarter. Growth was driven by additional revenue contribution from Black & Decker; higher unit volumes attributable to supply chain restocking and improving demand, and revenue contribution from other acquisitions. The positive momentum was partially offset by negative currency translation impact.
Detailed discussion on second quarter results can be found here: SWK’s 2Q Surpasses Zacks Estimate
Agreement of Estimate Revisions
In the last 30 days, there was no change in earnings estimates for the third quarter or full fiscal year 2010. Out of 9 analysts, only one analyst increased its estimate for 2011 driven primarily by the expectation of synergistic benefits from Black and Decker, ADT France and CRC-Evans acquisitions.
Our Take
Stanley Black & Decker is a manufacturer of tools and engineered security solutions. The company believes that the mergers will support continued expansion of its global business platform.
The recent acquisition of Black and Decker is expected to influence the company’s financials over time with roughly $350 million cost synergies anticipated by 2013, including $90 million in 2010. For 2010, EPS is anticipated in the $3.35 – $3.55 range. Also, from the ADT France acquisition, Stanley is likely to reap synergistic benefits in 2011. The CRC-Evans acquisition is anticipated to be accretive to 2010 earnings.
We believe Stanley Black & Decker is well positioned for another quarter of good financial results benefiting primarily from the company’s acquisitive nature, recovering global demand, inventory restocking and new product introductions.
Despite these, positive momentum might be restricted due to rising integration and financial risks. Also, active competition and dependence on the housing industry might be a cause of concern.
We currently maintain a Neutral recommendation on the stock, which is supported by the Zacks #3 Rank (Hold).
STANLEY B&D INC (SWK): Free Stock Analysis Report
Zacks Investment Research
