Mizuho Upgrades Stanley Black & Decker Inc (NYSE:SWK)

Mizuho has upgraded Stanley Black & Decker Inc to "outperform" from "neutral" due to improved execution, valuation, and an anticipated recovery in the tools market heading into 2025.

The brokerage has set a price target of $110. Mizuho observed that SWK shares are trading at a 20% discount compared to peers in building products and 40% below those in electrical equipment/manufacturing.

Stanley Black & Decker shares have significantly underperformed, down 15% this year, while electrical equipment/manufacturing stocks have seen a 32% gain, and tools peers have risen by 11%. Big-box retailers, which contribute 30% of the company's revenue, have increased by 18%.

Mizuho points to the potential for mean reversion as tools revenue, which has declined 20% from peaks in 2021, begins to recover. The report states, "Underlying revenues are down 20% from peak and now back to trend with the bottom in, or very near across entire tools complex."

Stanley has exceeded earnings expectations for two consecutive years after a major profit reset in early 2023. The company has reduced its inventories and demonstrated resilience in its professional business, while DIY consumer trends suggest stabilization.

Tariff-related challenges previously estimated at $200 million pre-tax are now mostly resolved, requiring only minimal price adjustments.

With a 4% dividend yield and long-term targets supporting its valuation, Mizuho has named SWK as a top pick among stocks in electrical equipment/manufacturing.