Stanley Black & Decker Q3 2024 Earnings Summary

Stanley Black & Decker (SWK) reported a 5% decline in third-quarter revenue year-over-year, totaling $3.8 billion, with organic revenue down 2%. Despite the revenue drop, the company experienced strong growth in its DEWALT tools and improved gross margins. Adjusted gross margin rose to 30.5%, up from the previous year, and the company is on track to achieve significant cost savings through its global cost reduction program. Stanley Black & Decker narrowed its full-year adjusted diluted EPS guidance and maintained its free cash flow forecast.

Key Takeaways

• Third-quarter revenue dropped to $3.8 billion, a 5% decrease year-over-year.
• Organic revenue fell by 2%, with DEWALT tools continuing to show strong growth.
• Adjusted gross margin improved to 30.5%, a 290 basis point increase from the previous year.
• The company is progressing toward its cost savings goal of $1.5 billion by the end of 2024.
• Adjusted diluted EPS for Q3 was reported at $1.22, with full-year guidance narrowed to $3.90 to $4.30.
• Executives anticipate a market recovery in 2025, potentially aided by interest rate cuts.

Company Outlook

• Stanley Black & Decker remains optimistic about a market rebound in 2025.
• The company is investing in growth initiatives, especially in the DEWALT product lines.
• A commitment of $30 million by 2027 is set to support skilled tradespeople.
• The upcoming Capital Markets Day will discuss future strategies and operational changes.

Bearish Highlights

• Revenue fell significantly, primarily due to the divestiture of the infrastructure business.
• Organic revenue and automotive volumes saw declines, although the aerospace sector and general industrial fasteners grew.
• The full-year organic revenue is expected to decline by 1%, with the Tools & Outdoor segment forecasted to be down 1%.

Bullish Highlights

• The company achieved $105 million in pretax run rate cost savings in Q3.
• Free cash flow remained strong at nearly $200 million.
• The Industrial adjusted segment margin rose, driven by price realization and cost control.

Misses

• The company's revenue fell 80% year-over-year in the third quarter due to divestiture.
• The Tools & Outdoor segment is expected to have flat pricing for the full year.

Q&A Highlights

• Management is focusing on cost reduction and is confident in achieving over 35% EBITDA growth.
• The impact of a potential Trump election victory on tariffs and supply chain strategies was discussed.
• Gross margin expectations are around 31% for the first half of the year.

Stanley Black & Decker's third-quarter performance reflects a company navigating challenging market conditions while focusing on strategic growth and cost management. With its eyes set on a market recovery and future profitability, the company continues to invest in its core brands and initiatives to support skilled trades. The next detailed guidance will be provided at the end of 2024, offering further insights into Stanley Black & Decker's path ahead.

InvestingPro Insights

Stanley Black & Decker's recent financial performance illustrates a robust presence in the Machinery industry despite its revenue decline. Key insights from InvestingPro highlight a continuous dividend increase over 54 years, indicating strong shareholder commitment amid challenges.

Full Transcript – Stanley Black & Decker Inc (SWK) Q3 2024

Operator: Welcome to the Third Quarter 2024 Stanley Black & Decker Earnings Conference Call. My name is Shannon, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. I will now turn the call over to Vice President of Investor Relations, Dennis Lange. Mr. Lange, you may begin.

Dennis Lange: Thank you, Shannon. Good morning, everyone, and thanks for joining us for Stanley Black & Decker's 2024 Third Quarter Webcast. Here today is Don Allan, President and CEO; Chris Nelson, COO and EVP; and Pat Hallinan, EVP and CFO. Our earnings release is available on the IR section of our website. We will review our Q3 results followed by a Q&A session.

Donald Allan: Thank you, Dennis, and good morning, everyone. This quarter, our team delivered gross margin improvements and solid cash generation due to effective execution against our operational priorities. We're focused on transforming our supply chain to achieve our target of over 35% gross margin. We expect these actions to enhance our in-market activation and capture long-term opportunities.

Christopher Nelson: Thank you, Don. In the Tools & Outdoor segment, third quarter revenue was approximately $3.3 billion, down 2% organically. DEWALT achieved its sixth consecutive quarter of organic growth, mitigating to some extent the challenges within the consumer market.

Patrick Hallinan: Thanks, Chris. In Q3, we achieved about $105 million in pretax run rate cost savings and continue to target $1.5 billion in savings by the end of 2024, supporting our move toward 35% adjusted gross margin.

Donald Allan: Thank you for your attention. We expect significant opportunities for sustainable growth in the near and long term. Now we’re ready for Q&A.

Dennis Lange: Thank you. We can now start the Q&A, please.

Operator: Thank you. Our first question comes from the line of Julian Mitchell with Barclays. Your line is now open.