Stanley Black & Decker, Inc. :SWK-US: Earnings Analysis: Q3, 2017 By the Numbers : October 27, 2017

Stanley Black & Decker, Inc. reports financial results for the quarter ended September 30, 2017.

We analyze the earnings along side the following peers of Stanley Black & Decker, Inc. – Snap-on Incorporated, Illinois Tool Works Inc., 3M Company and General Electric Company (SNA-US, ITW-US, MMM-US and GE-US) that have also reported for this period.


  • Summary numbers: Revenues of USD 3,298.60 million, Net Earnings of USD 274.20 million.
  • Gross margins widened from 37.70% to 38.37% compared to the same period last year, operating (EBITDA) margins now 19.10% from 18.88%.
  • Year-on-year change in operating cash flow of 44.67% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • One-time items weakened operating performance.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-09-30 2017-06-30 2017-03-31 2016-12-31 2016-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 3298.6 3229.5 2805.6 2920.4 2882
Revenue Growth (%YOY) 14.46 10.13 5 2.64 1.86
Earnings (mil) 274.2 277.2 393.1 255.5 248.9
Earnings Growth (%YOY) 10.16 2.1 107.55 -4.38 6.32
Net Margin (%) 8.31 8.58 14.01 8.75 8.64
EPS 1.8 1.82 2.59 1.71 1.68
Return on Equity (%) 3.49 3.82 5.96 4.1 4.17
Return on Assets (%) 5.61 5.84 9.17 6.52 6.33

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Market Share Versus Profits

Revenues History
Earnings History

SWK-US’s change in revenue this period compared to the same period last year of 14.46% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that SWK-US is holding onto its market share. Also, for comparison purposes, revenues changed by 2.14% and earnings by -1.08% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from 37.70% to 38.37% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from 18.88% to 19.10% compared to the same period last year. For comparison, gross margins were 38.18% and EBITDA margins were 19.14% in the last reporting period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

SWK-US’s gross margin improvement has not produced any big difference in its working capital. Working capital days are currently 27.57, compared to last year’s level of 21.82 days. This leads Capital Cube to conclude that the improvements in gross margins are likely from operating decisions and not trade-offs with the balance sheet.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

SWK-US’s change in operating cash flow of 44.67% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings


The expansion in operating (EBIT) margins from 15.30% to 15.44% has also impacted the company’s earnings growth. However, one-time items have been a drag on the operating performance. As a result, the company’s pretax margins contracted from 11.37% to 10.73%.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for Stanley Black & Decker, Inc.

Company Profile

Stanley Black & Decker, Inc. Provides power and hand tools, products and services for various industrial applications, mechanical access solutions and electronic security and monitoring systems. It also manufactures and markets industrial tools and security solutions. It operates through three business segments: Tools & Storage, Security and Industrial. The Tools & Storage segment is comprised of the power tools and hand tools & storage businesses. The Security segment includes convergent security solutions and mechanical access solutions businesses. The Industrial segment encompass of the engineered fastening and infrastructure businesses. The company was founded by Frederick T. Stanley in 1843 and is headquartered in New Britain, CT.

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