STANLEY BLACK & DECKER INC. (New York symbol SWK; www.stanleyblackanddecker.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 supplied 51% of Stanley’s 2011 sales and 46% of its earnings.
The company’s building-security division makes locks, automatic doors and gates. It also monitors properties for its clients, typically through closed-circuit audio and TV systems. This division accounts for 25% of Stanley’s sales and 27% of its earnings.
The remaining 24% of sales and 27% of earnings comes from selling specialized tools to industrial users, such as auto mechanics and construction firms.
In 2011, Stanley paid $984.5 million for Sweden’s Niscayah Group AB, which designs and installs security systems. That helped push up its sales to $10.4 billion during the year.
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Investing in stocks: Acquisitions give major boost to Stanley’s overseas sales
Acquisitions have helped cut Stanley’s reliance on the U.S.; it now gets 49% of its sales from overseas. However, expanding by acquisition does add risk.
As well, Stanley must continue to do a good job of integrating the companies it buys. Its goal is to cut Black & Decker’s annual costs by $485 million by the end of 2012. It also aims to cut Niscayah’s yearly costs by $80 million by the end of 2013.
To sharpen its focus, Stanley is now considering selling some of the more cyclical businesses it acquired from Black & Decker, such as door knobs and bath fixtures. The company could receive $1.5 billion for these operations.
Stanley will probably earn $5.83 a share in 2012. The current annual dividend of $1.64 a share yields 2.6%.
In the latest edition of Wall Street Stock Forecaster, we look at whether Stanley’s expanding global reach can offset the added risk of its acquisition policy and allow it to keep raising its dividend. We conclude with our clear buy-hold-sell advice on the stock.
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Stanley Black & Decker is the result of a 2010 merger between two major tool companies. In your experience as an investor, has there been a merger involving a stock you owned that worked out particularly well? Or one that turned out badly? What do you believe makes a successful merger? Let us know what you think in the comments section below. Click here.
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