Stanley Black & Decker Provides Strategic Update at Capital Markets Day

Rhea-AI Summary

Stanley Black & Decker (NYSE: SWK) hosted its 2024 Capital Markets Day, providing strategic updates and future financial targets. The company reaffirmed its 2024 guidance with GAAP EPS of $1.15-$1.75 and adjusted EPS of $3.90-$4.30, expecting free cash flow of $650-850 million. For 2027, SWK targets net sales of $16.5-17.0B, adjusted EBITDA of ~$2.5B, and free cash flow conversion of ~100%. The company aims to achieve sustainable 35%+ adjusted gross margins through operational excellence and market share growth initiatives.

Positive

• Reaffirmed 2024 guidance with strong free cash flow projection of $650-850M
• Targeting net sales growth to $16.5-17.0B by 2027
• Aiming for adjusted EBITDA of ~$2.5B by 2027
• Projecting 100% free cash flow conversion by 2027
• Commitment to maintain solid investment grade credit rating

Negative

• Low single-digit revenue CAGR projected for next 3 years
• Significant gap between GAAP EPS ($1.15-1.75) and adjusted EPS ($3.90-4.30) for 2024
• Ongoing restructuring and transformation costs impacting GAAP earnings

Insights

Financial Analyst

Stanley Black & Decker's Capital Markets Day reveals significant strategic updates and financial targets. The company aims for $16.5-17.0B in net sales by 2027, representing low-single-digit growth, with adjusted EBITDA targeting $2.5B. For 2024, they maintain guidance of $3.90-4.30 adjusted EPS and $650-850M free cash flow.

The transformation strategy focuses on achieving 35%+ adjusted gross margins through operational excellence and supply chain improvements. Key financial metrics look solid with:

• Commitment to dividend growth
• Maintenance of investment-grade credit rating
• ~100% free cash flow conversion target

While the targets appear conservative, they reflect realistic expectations given market conditions and ongoing transformation efforts. The focus on operational efficiency and margin expansion could provide meaningful upside if executed successfully.

Market Research Analyst

The strategic update indicates a measured approach to growth, prioritizing operational efficiency over aggressive expansion. The company's transformation since 2022 has established a foundation for sustainable growth, though the projected revenue CAGR appears modest for a market leader.

Market positioning remains strong with iconic brands like DEWALT, CRAFTSMAN and BLACK+DECKER. The focus on professional trades and DIY markets provides stability, but growth potential may be by:

• Mature market dynamics
• Potential tariff impacts in 2025
• Geopolitical uncertainties

The cautious outlook suggests management is prioritizing predictable performance over ambitious targets, which could help rebuild investor confidence after recent years of volatility.

NEW BRITAIN, Conn., Nov. 20, 2024 /PRNewswire/ -- Stanley Black & Decker (NYSE: SWK), today hosted its 2024 Capital Markets Day with investors at the New York Stock Exchange and via live webcast.

At the event, members of Stanley Black & Decker's leadership team provided an update on the Company's strategic imperatives and how its strategy is designed to deliver the Company's long-term earnings potential.

Key Takeaways From Capital Markets Day

• The path to successfully completing the strategic transformation, through which it believes it has established a solid foundation for growth.
• The actions it is taking to deliver on its priorities of operational excellence, market share growth and balance sheet health.
• Its vision for a multi-year roadmap designed to accelerate organic growth* and achieve sustainable 35%+ adjusted gross margins* to deliver a compelling shareholder value creation opportunity.

Donald Allan, Jr., Stanley Black & Decker's President & CEO, commented, "Since the outset of our strategic transformation in 2022, we've delivered strong execution against our vision. Through our disciplined approach, we believe we've built a solid foundation for sustainable growth and are now activating a growth culture with operational excellence at its core. The proof points we see across the company give us conviction in our ability to achieve the margin and cash flow goals of the transformation. Looking to the future, we believe we are well-positioned in attractive industries that have strong growth profiles over the long-term, and we see tangible pathways for future share gain by investing behind our iconic brands, innovation and our people.  The actions we are taking across the business position the Company to deliver higher levels of organic revenue growth*, profitability and cash flow, and ultimately, strong long-term shareholder returns."

*Non-GAAP Financial Measure As Further Defined On Page 3.

2024 Guidance

Management reaffirmed its full year 2024 guidance as provided on October 29, 2024.  The Company continues to expect its 2024 GAAP EPS to be between $1.15 to $1.75 and adjusted EPS* to be between $3.90 to $4.30.  The Company also reiterated that it expects free cash flow* at approximately $650 million to $850 million. The difference between 2024 GAAP and adjusted EPS* guidance is approximately $2.55 to $2.75, consisting primarily of charges related to the supply chain transformation under the Global Cost Reduction Program, environmental reserve adjustments and a brand impairment charge.

2027 Financial Targets**

In addition, Stanley Black & Decker provided 2027 financial targets as follows:

• Net Sales: $16.5B to $17.0B (low-single digit 3-year revenue CAGR)
• Adjusted EBITDA*: ~$2.5B +/- $100M (with >35% adjusted gross margins*)
• Free Cash Flow Conversion*: ~100% +/-10pts
• Continued Dividend Growth
• Solid Investment Grade Credit Rating

Patrick D. Hallinan, Executive Vice President and CFO, commented, " We remain focused on executing strategies to deliver further supply chain improvements as we drive toward our target of 35%+ adjusted gross margins*, support incremental growth investments, and pursue compelling opportunities to push beyond the transformation milestones. We are confident that we are taking the actions to position the business for sustainable and growing earnings power, which along with disciplined capital deployment has the potential to deliver compelling shareholder value over the long term."

Access to a replay of the webcast, an agenda and presentation materials will be available directly on the 2024 Capital Markets Day Event Page in the "Investors" section of the Stanley Black & Decker website.

Celebrating a History of Innovation

In 1961, Stanley Black & Decker introduced the world's first cordless drill, a tool that completely revolutionized the industry. To commemorate DEWALT's 100-year anniversary, the Company has partnered with the New York Stock Exchange to display this historical drill alongside DEWALT's newest cordless drill, highlighting the Company's relentless focus on innovation and delivering forward progress on behalf of professional trades and DIY end users. These tools will be on display through the first quarter of 2025.   

*Non-GAAP Financial Measure As Further Defined On Page 3.
**Assumes Any New Tariffs That May Be Implemented During The First Half Of 2025 Can Be Mitigated Within 12-24 Months, And Any Other Geopolitics, Including Any Other New Tariffs, Are Not Materially Disruptive.

About Stanley Black & Decker
Founded in 1843 and headquartered in the USA, Stanley Black & Decker (NYSE: SWK) is a worldwide leader in Tools and Outdoor, operating manufacturing facilities globally. The Company's approximately 50,000 employees produce innovative end-user inspired power tools, hand tools, storage, digital jobsite solutions, outdoor and lifestyle products, and engineered fasteners to support the world's builders, tradespeople and DIYers. The Company's world class portfolio of trusted brands includes DEWALT®, CRAFTSMAN®, STANLEY®, BLACK+DECKER®, and Cub Cadet®. To learn more visit: www.stanleyblackanddecker.com or follow Stanley Black & Decker on Facebook, Instagram, LinkedIn and X.

Investor Contacts:
Dennis Lange
Vice President, Investor Relations
dennis.lange@sbdinc.com
(860) 827-3833

Christina Francis
Director, Investor Relations
christina.francis@sbdinc.com
(860) 438-3470

Media Contacts:
Debora Raymond
Vice President, Public Relations
debora.raymond@sbdinc.com 
(203) 640-8054

Non-GAAP Financial Measures
Organic revenue is defined as the difference between total current and prior year sales less the impact of companies acquired and divested in the past twelve months and any foreign currency impacts. Organic revenue growth or organic growth is organic revenue divided by prior year sales. Gross profit is defined as sales less cost of sales. Gross margin is gross profit as a percentage of sales. EBITDA is earnings before interest, taxes, depreciation and amortization. Gross margin, earnings, and EBITDA are adjusted for certain gains and charges, which may include acquisition and divestiture-related items, asset impairments, restructuring, transformation costs, environmental charges, and other adjusting items. Management uses these metrics as key measures to assess the performance of the Company. Adjusted earnings per share or adjusted EPS, is diluted GAAP EPS excluding certain gains and charges. Free cash flow is defined as cash flow from operations less capital and software expenditures. Management considers free cash flow an important indicator of its liquidity, as well as its ability to fund future growth and to provide a return to the shareowners and is useful information for investors. Free cash flow does not include deductions for mandatory debt service, other borrowing activity, discretionary dividends on the Company's common stock and business acquisitions, among other items.  Free cash flow conversion is defined as free cash flow divided by net income. The Company considers the use of the Non-GAAP financial measures above relevant to aid analysis and understanding of the Company's results, business trends and outlook measures aside from the material impact of certain gains and charges and ensures appropriate comparability to operating results of prior periods.

The Company also provides expectations for the non-GAAP financial measures of adjusted EPS, presented on a basis excluding certain gains and charges, as well as free cash flow and free cash flow conversion. Forecasted adjusted EPS is reconciled to forecasted GAAP EPS on page 2. Due to high variability and difficulty in predicting items that impact cash flow from operations, reconciliations of forecasted free cash flow and forecasted free cash flow conversion to the most directly comparable GAAP estimates have been omitted. The Company believes such reconciliations would also imply a degree of precision that is inappropriate for these forward-looking measures.

Cautionary Note Regarding Forward-Looking Statements
This Press Release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are "forward-looking statements" for purposes of federal and state securities laws, including, but not limited to, any statements of  goals, targets, projections or guidance of earnings, income, revenue, margins, cash flow, costs of sales, sales, growth, profitability, market share, credit, shareholder value, or other financial items; any statements of the plans, strategies and objectives of management for future operations, including expectations around the Company's ongoing transformation or investments; any statements concerning proposed new products, services, developments or innovation; any statements regarding future economic conditions or performance; any statements of belief, plans intentions or expectations; any statements and assumptions regarding geopolitical events, possible tariff and tariff impact projections (including the timing and  materiality thereof) and related mitigation plans or timing; the Company's expectations concerning future dividends and investment grade rating; and any statements of assumptions underlying any of the foregoing. Forward-looking statements may include, among others, the words "may," "will," "estimate," "intend," "could," "project," "plan," "continue," "believe," "expect," "anticipate", "run-rate", "annualized", "forecast", "commit", "design", "position or positioning", "guidance" "looking forward", "path," "pathways," "multi-year," "future", "vision", "strategy", "long-term", or any other similar words.

Although the Company believes that the expectations reflected in any of its forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of its forward-looking statements. The Company's future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent risks and uncertainties, such as those disclosed or incorporated by reference in the Company's filings with the Securities and Exchange Commission.

Important factors that could cause the Company's actual results, performance and achievements, or industry results to differ materially from estimates or projections contained in its forward-looking statements include, among others, the following: (i) successfully developing, marketing and achieving sales from new products and services and the continued acceptance of current products and services; (ii) macroeconomic factors, including global and regional business conditions, commodity prices, inflation and deflation, interest rate volatility, currency exchange rates, and uncertainties in the global financial markets related to the recent failures of several financial institutions; (iii) laws, regulations and governmental policies affecting the Company's activities in the countries where it does business, including those related to taxation, data privacy, anti-bribery, anti-corruption and government contracts; (iv) changes in trade-related regulations and restrictions such as import and export controls and tariffs, such as section 301 tariffs and section 232 steel and aluminum tariffs, and the Company's ability to predict the timing, extent, materiality or disruptiveness to the Company of such regulations, restrictions and tariffs and the Company's ability to successfully mitigate or respond to and such macroeconomic, geopolitical, or trade and tariff changes including, obtaining price increases from customers, repositions of supply chain, reprioritizing resources and successful government engagement efforts ; (v) the economic, political, cultural and legal environment in Europe and the emerging markets in which the Company generates sales, particularly Latin America and China; (v) realizing the anticipated benefits of mergers, acquisitions, joint ventures, strategic alliances or divestitures; (vii) pricing pressure and other changes within competitive markets; (viii) availability and price of raw materials, component parts, freight, energy, labor and sourced finished goods; (ix) the impact that the tightened credit markets may have on the Company or its customers or suppliers; (x) the extent to which the Company has to write off accounts receivable, inventory or other assets or experiences supply chain disruptions in connection with bankruptcy filings by customers or suppliers; (xi) the Company's ability to identify and effectively execute productivity improvements and cost reductions; (xii) potential business, supply chain and distribution disruptions, including those related to physical security threats, information technology or cyber-attacks, epidemics, natural disasters or pandemics, sanctions, political unrest, war or terrorism, including the conflicts between Russia and Ukraine, and Israel and Hamas, and tensions or conflicts in South Korea, China, Taiwan and the Middle East; (xiii) the continued consolidation of customers, particularly in consumer channels, and the Company's continued reliance on significant customers; (xiv) managing franchisee relationships; (xv) the impact of poor weather conditions and climate change and risks related to the transition to a lower-carbon economy, such as the Company's ability to successfully adopt new technology, meet market-driven demands for carbon neutral and renewable energy technology, or to comply with changes in environmental regulations or requirements, which may be more stringent and complex, impacting its manufacturing facilities and business operations as well as remediation plans and costs relating to any of its current or former locations or other sites; (xvi) maintaining or improving production rates in the Company's manufacturing facilities, responding to significant changes in customer preferences or expectations, product demand and fulfilling demand for new and existing products, and learning, adapting and integrating new technologies into products, services and processes; (xvii) changes in the competitive landscape in the Company's markets; (xviii) the Company's non-U.S. operations, including sales to non-U.S. customers; (xix) the impact from demand changes within world-wide markets associated with homebuilding and remodeling; (xx) potential adverse developments in new or pending litigation and/or government investigations; (xxi) the incurrence of debt and changes in the Company's ability to obtain debt on commercially reasonable terms and at competitive rates; (xxii) substantial pension and other postretirement benefit obligations; (xxiii) potential regulatory liabilities, including environmental, privacy, data breach, workers compensation and product liabilities; (xxiv) attracting, developing and retaining senior management and other key employees, managing a workforce in many jurisdictions, labor shortages, work stoppages or other labor disruptions; (xxv) the Company's ability to keep abreast with the pace of technological change; (xxvi) changes in accounting estimates; (xxvii) the Company's ability to protect its intellectual property rights and to maintain its public reputation and the strength of its brands; (xxviii) critical or negative publicity, including on social media, whether or not accurate, concerning the Company's brands, products or initiatives, and (xxix) the Company's ability to implement, and achieve the expected benefits (including cost savings and reduction in working capital) from its Global Cost Reduction Program including: continuing to advance innovation, electrification and global market penetration to achieve organic revenue growth of 2-3 times the market; streamlining and simplifying the organization, and investing in initiatives that more directly impact the Company's customers and end users; returning adjusted gross margins* to historical 35%+ levels by accelerating the supply chain transformation to leverage strategic sourcing, drive operational excellence, rationalize manufacturing and distribution networks, including consolidating facilities and optimizing the distribution network, and reduce complexity of the product portfolio; improving fill rates and matching inventory with customer demand; prioritizing cash flow generation and inventory optimization; executing the SBD Operating Model to deliver operational excellence through efficiency, simplified organizational design; and reducing complexity through platforming products and implementing initiatives to drive a SKU reduction.

Additional factors that could cause actual results to differ materially from forward-looking statements are set forth in the Annual Report on Form 10-K and in the Quarterly Reports on Form 10-Q, including under the headings "Risk Factors," and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and in the Consolidated Financial Statements and the related Notes and its other filings with the SEC.

Forward-looking statements in this Press Release speak only as of the date hereof, and forward-looking statements in documents that are incorporated by reference herein speak only as of the date of those documents. The Company does not undertake any obligation or intention to update or revise any forward-looking statements, whether as a result of future events or circumstances, new information or otherwise, except as required by law.

 

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SOURCE Stanley Black & Decker, Inc.

FAQ

What is Stanley Black & Decker's (SWK) 2024 EPS guidance?

For 2024, SWK expects GAAP EPS of $1.15-$1.75 and adjusted EPS of $3.90-$4.30.

What are Stanley Black & Decker's (SWK) 2027 revenue targets?

SWK targets net sales of $16.5-17.0 billion by 2027, representing a low single-digit 3-year revenue CAGR.

What is Stanley Black & Decker's (SWK) free cash flow target for 2024?

SWK expects free cash flow of approximately $650 million to $850 million for 2024.

What is Stanley Black & Decker's (SWK) adjusted gross margin target?

SWK aims to achieve sustainable 35%+ adjusted gross margins.