Stanley Black & Decker (SWK) reported its financial results for the first quarter of 2012 on April 18, 2012. Earnings per share from continuing operations were $1.09, a cent above $1.08 per share reported in the year-ago quarter. Earnings results for the quarter, however, lagged behind the Zacks Consensus Estimate of $1.13.
GAAP EPS including 37 cents of merger related charges was 72 cents compared with 92 cents in the first quarter of 2011.
Revenue
Net revenue in the quarter jumped 12% year over year to roughly $2.7 billion. The increase reflects a 2% growth from unit volume; a 1% positive price impact and 10% positive impact from acquisitions.
Revenue in the CDIY segment increased 1.4% year over year to $1,228.2 million, while the Security segment reported revenues of $762.7 million, reflecting a rise of 38.7%. Industrial segment sales increased 10.2% to $662.0 million.
In the first quarter 2012, normalized cost of sales, as a percentage of revenue was 62.6%, flat as compared with the year-ago quarter. Gross margin in both the periods stood at 37.4%.
Selling, general and administrative expenses registered an increase of 11.1% year over year, but as a percentage of revenue declined 30 basis points to 24.5%. Operating margin in the quarter was 12.8% versus 12.6% in the year-ago comparable quarter.
Balance Sheet
Exiting the first quarter, Stanley Black & Decker’s cash and cash equivalents decreased 2.6% sequentially to $883.6 million. Long-term debt, net of current portion was $2,905.7 million, down from $2,925.8 million in the previous quarter.
Normalized net cash flow from operating activities was approximately $29.2 million in the first quarter of 2011, a drastic fall from $134.1 million in the year-ago quarter. Capital spending declined 45.9% year over year to $37.9 million. Free cash flow in the quarter was ($8.7) million versus $64.0 million in the comparable period last year.
In the fourth quarter, the company expended approximately $69.9 million in paying dividends to shareholders.
Outlook
Management reiterated its guidance for the fiscal year 2012, still anticipating fiscal year earnings, excluding merger related charges, to be within the $5.75-$6.00 range. Organic net sales growth is expected to be up approximately 1%-2% from the $11 billion base in 2011.
Cost synergies of approximately $115 million from the Black & Decker acquisition and $45 million from the Niscayah acquisition in 2012 are likely to be roughly 70 cents accretive to EPS. Also, the $150 million cost reduction program along with pre-tax benefits will add roughly 70 cents to EPS. GAAP EPS for the year is expected to be roughly within the $4.71-$4.97 range. Free cash flow is expected to be roughly $1.2 billion.
Stanley Black & Decker manufactures tools and engineered security solutions across the globe. Prime competitors of the company are Danaher Corp. (DHR), Makita Corp. (MKTAY), and Snap-on Inc. (SNA).
We currently maintain a Neutral recommendation on the stock.
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