On Wednesday, Stanley Black & Decker's (NYSE:SWK) stock had its price target increased by Mizuho from $100.00 to $110.00 while the firm retained a Neutral rating on the shares. This adjustment follows the company's second quarter results, which were slightly above expectations despite challenging economic conditions. The growth was attributed to a 2% increase in the professional tools segment, which helped offset a slowdown in the do-it-yourself market.
Stanley Black & Decker's full-year sales outlook was lowered due to sluggish consumer demand. However, the company has implemented cost reduction strategies that are expected to yield significant savings. By the end of the year, pre-tax savings are projected to reach $1.5 billion, with a further increase to $2 billion anticipated in 2025, stemming from improved sourcing.
The company's gross margins are on track to exceed 30% by the fourth quarter, with a continued trajectory towards 35% or higher. The updated guidance range accounts for market volatility. Mizuho also revised its earnings per share estimates for Stanley Black & Decker, increasing the 2024 forecast to $4.10 from a previous $4.00, and the 2025 estimate to $5.30 from $5.20, based on the company’s operational performance.
Despite the increased price target, Mizuho noted that Stanley Black & Decker's stock is not cheap at approximately 19 times the firm's 2025 earnings estimate, compared to a historical average of around 15 times and peers' high-teen price-to-earnings ratios. The stock is considered roughly fairly valued when looking at preliminary 2026 earnings per share estimates of about $7.25.
The market may be pricing in anticipated rate cuts, but the analyst suggests this does not leave a substantial upside at the company's current operating levels. Mizuho's preference leans toward Pentair (NYSE:PNR), which has similar consumer exposures.
In other recent news, Stanley Black & Decker has reported organic growth and improved gross margins in the second quarter of 2024, despite facing market challenges. The company has raised its full-year guidance for adjusted diluted EPS and free cash flow, indicating a confident outlook for its financial health.
Stanley Black & Decker also announced plans to invest between $300 million to $500 million to drive earnings potential, with a focus on its DEWALT, CRAFTSMAN, and STANLEY brands.
The company's industrial segment revenue declined due to infrastructure divestiture, while the Tools & Outdoor segment saw growth driven by DEWALT and outdoor products. Stanley Black & Decker is also undergoing a supply chain transformation aimed at enhancing operational efficiency.
However, the company expects a slight decline in full-year organic revenue and anticipates a 1% decline in Tools & Outdoor revenue. Yet, despite these challenges, Stanley Black & Decker remains optimistic about its long-term growth potential. The company's cost reduction program is on track, and recent product launches and digital marketing efforts are expected to bolster the DEWALT brand and overall company performance.
InvestingPro Insights
In the light of Stanley Black & Decker's (NYSE:SWK) recent performance and Mizuho's updated price target, it's insightful to consider some key real-time metrics from InvestingPro. The company's market capitalization stands at a robust $16.41 billion, signaling a strong market presence. Despite a challenging market, Stanley Black & Decker has managed to maintain a high dividend yield of 3.09%, which is particularly notable given the company's impressive history of raising its dividend for 54 consecutive years—a testament to its commitment to shareholder returns.
InvestingPro Tips highlight that Stanley Black & Decker has seen significant returns over the last week, with a 22.76% price total return, and over the last month, with a 32.75% return. This momentum is underscored by the analysts' revisions, with 5 analysts having revised their earnings upwards for the upcoming period, indicating a positive outlook for the company's financial performance. For investors seeking more insights, there are additional tips available on InvestingPro, providing an in-depth analysis of Stanley Black & Decker's prospects.
These insights and tips, such as the expected growth in net income this year and the company's status as a prominent player in the Machinery industry, can be further explored on InvestingPro, which includes a total of 13 additional tips for SWK. This information is invaluable for those considering an investment in Stanley Black & Decker or looking to understand the company's position in the current market.
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