Stanley Black & Decker, Inc. SWK revealed fourth-quarter 2023 adjusted earnings of 92 cents per share, surpassing the Zacks Consensus Estimate of 73 cents and an improvement from a loss of 10 cents per share in the year-ago quarter.
The company’s net sales of $3.7 billion fell short of the consensus estimate of $3.9 billion, reflecting a 6.3% drop year over year, largely attributed to the weakness in the Tools & Outdoor segment.
Struggles in the Tools & Outdoor Segment
SWK’s primary segment, Tools & Outdoor, saw a decline of 7% in revenues to $3.2 billion. This was due to lower consumer outdoor and DIY market demand, affecting the segment’s revenues negatively. As a result, the segment’s annual revenues dropped by 7.3% in 2023, underscoring the challenges it faced.
Industrial segment revenues also witnessed a downturn, totalling $582.3 million, reflecting a 4% decrease year over year.
Margin Performance
In the reported quarter, Stanley Black’s cost of sales decreased considerably in comparison to the previous year, driving a noticeable 46.6% increase in gross profit. The gross margin also improved substantially by 1070 basis points (bps) to 29.6%. However, selling, general and administrative expenses saw a 10.1% increase to $834.0 million. On a positive note, adjusted EBITDA grew by over 100% to $350.3 million.
Balance Sheet and Cash Flow
Stanley Black ended the fourth quarter with cash and cash equivalents of $449.4 million, up from $395.6 million reported at the end of the previous year’s fourth quarter. However, long-term debt balance increased to $6.1 billion, compared to $5.4 billion reported at the end of the prior year’s fourth quarter.
In 2023, net cash provided by operating activities amounted to $1.2 billion, an improvement from the $1.5 billion in cash used in the year-ago period. Furthermore, capital and software expenditures dropped to $338.7 million from $530.4 million reported in the previous year. The company’s free cash inflow (before dividends) in 2023 was $852.6 million, indicating a substantial recovery from the $2.0 billion free cash outflow in the prior year.
2024 Outlook and Stock Recommendations
For 2024, Stanley Black anticipates adjusted earnings of $3.50-$4.50 per share, which falls slightly below the Zacks Consensus Estimate of $4.38. Moreover, the company projects earnings of $1.60-$2.85 per share in the year and expects a free cash flow of $0.6-$0.8 billion for 2024.
SWK currently carries Zacks Rank #3 (Hold). Deserving special mention are some better-ranked companies from the Industrial Products sector. These include Flowserve Corporation (Zacks Rank #2), A. O. Smith Corporation (Zacks rank of 2), and Crane Company (Zacks Rank of 2).
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