STANLEY BLACK & DECKER INC. $103 (New York symbol SWK; Conservative Growth and Income Portfolios, Manufacturing & Industry sector; Shares outstanding: 153.7 million; Market cap: $15.8 billion; Price-to-sales ratio: 1.4; Dividend yield: 2.0%; TSINetwork Rating: Average; www.stanleyblack anddecker.com) is one of the world’s largest makers of hand and power tools for consumers. Its top-selling brands include Stanley, Black & Decker, FatMax and Powerlock. This business supplies 62% of the company’s sales.
Stanley also makes building-security products, such as locks and gates (19% of sales) and specialized tools for industrial users, including auto mechanics and construction firms (19%).
The company has a long history of using acquisitions to diversify its operations. Since 2002, it has spent $6.2 billion buying related firms, excluding its March 2010 purchase of rival toolmaker Black & Decker for $4.5 billion in stock.
In the three months ended April 4, 2015, Stanley’s earnings slipped 1.7%, to $166.8 million from $169.7 million a year earlier. However, the latest figure included a $24.9-million restructuring charge, compared to a $3.7- million credit in the year-earlier quarter. Per-share earnings were unchanged at $1.07 on fewer shares outstanding.
Sales edged up 0.5%, to $2.63 billion from $2.62 billion.
Stanley gets half of its sales from outside of the U.S. If you disregard the negative impact of the high U.S. dollar, its sales rose 8%. That’s mainly because North America’s improving real estate market is prompting more homeowners to renovate their properties.
In the past two years, Stanley has focused on upgrading its operations instead of pursuing acquisitions. It’s using the resulting savings to buy back roughly $1 billion of its shares by the end of 2015. As well, it will likely raise its dividend again later this year. The current annual rate of $2.08 yields 2.0%.
Stanley’s recent purchases have increased its goodwill and other intangible assets to $9.8 billion, or a high 62% of market cap. However, it has a long record of successfully absorbing new operations, which cuts the risk of a big writedown.
The stock is up 19% in the past year but it still trades at a reasonable 17.9 times Stanley’s likely 2015 earnings of $5.76 a share.
Stanley Black & Decker is a buy.
