Stanley Black & Decker Inc (SWK) Q1 2025 Earnings Call Highlights: Strong Outdoor ...

GuruFocus News

Thu, May 1, 2025, 12:06 AM 4 min read

Total Revenue: $3.7 billion, consistent with the plan.
Organic Revenue Growth: Up 1%, led by solid outdoor performance.
Adjusted Gross Margin: 30.4%, up 140 basis points year-over-year.
Adjusted EBITDA Margin: Approached 10%, an increase of approximately 80 basis points versus the prior year.
Adjusted Earnings Per Share (EPS): $0.75, up 34% versus last year.
Free Cash Outflow: $485 million, consistent with prior year and historical seasonality.
Tools and Outdoor Revenue: Approximately $3.3 billion, flat versus the first quarter of 2024.
DEWALT Revenue Growth: Mid-single digits, marking the eighth consecutive quarter of growth.
Engineered Fastening Revenue Decline: Down 21% versus prior year, with a slight organic revenue decline of 1%.
Cost Savings Achieved: Approximately $130 million in pretax run rate cost savings in the first quarter.

Warning! GuruFocus has detected 8 Warning Signs with SWK.

Release Date: April 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Stanley Black & Decker Inc (NYSE:SWK) reported organic revenue growth of 1% in the first quarter, driven by strong performance in the outdoor segment.
The company achieved a year-over-year gross margin expansion of 140 basis points, reaching 30.4%, due to supply chain efficiencies and positive mix benefits from new innovation launches.
The DEWALT brand continued its growth trajectory with mid-single-digit revenue increases, marking its eighth consecutive quarter of growth.
Stanley Black & Decker Inc (NYSE:SWK) is on track to achieve its $2 billion savings target by 2025, with $1.7 billion already realized since the program's inception.
The company has significantly reduced its China manufacturing footprint for the US market, enhancing its supply chain flexibility with hubs in the US, Mexico, and Southeast Asia.

Negative Points

The company faces challenges from tariffs, with an estimated $1.7 billion gross annualized impact, leading to a $0.75 headwind on adjusted EPS for 2025.
First quarter free cash outflow was $485 million, consistent with historical seasonality but impacted by targeted inventory investments due to trade uncertainties.
The DIY market remains soft, contributing to a 2% organic revenue decline in the Power Tools segment.
The Engineered Fastening segment experienced a 21% revenue decline, impacted by the divestiture of the infrastructure business and softness in the automotive sector.
Stanley Black & Decker Inc (NYSE:SWK) anticipates a low single-digit volume decline due to the impact of tariffs and potential changes in consumer behavior.

Q & A Highlights

Q: Don, Chris, it's surprising that Mexico is only 1/3 USMCA compliant. Can you explain why and how quickly this can be rectified? Also, why are the Rest of World tariffs at 10%? A: (Donald Allan, CEO) The transition from the original agreement to USMCA had nuances that weren't worth the cost-benefit trade-off at the time. We are operationalizing plans to increase compliance. (Patrick Hallinan, CFO) The Rest of World tariff rate is based on current policy, which is 10% for the countries involved.

Q: How do you plan to offset the $1.7 billion gross tariff impacts with price, SG&A cost reductions, and facility moves? A: (Patrick Hallinan, CFO) For 2025, we expect tariff expenses to hit around $1 billion. Near-term mitigation will be dominated by price increases. We also plan to manage SG&A expenses and make supply chain adjustments over the next two years to reduce dependency on China.

Q: Can you explain the phasing of the $140 million net headwind from tariffs and how it differs from the $1 billion gross headwind in the P&L? A: (Patrick Hallinan, CFO) The second quarter will bear a heavy tariff burden due to LIFO accounting. We expect the back half of the year, particularly the fourth quarter, to be the strongest for EPS and cash flow as pricing catches up with tariff expenses.

Q: How much pricing has been implemented with retail partners, and how are those conversations going? A: (Christopher Nelson, COO) We have implemented a high single-digit price increase, which is now in effect. We are in early discussions with customers about further price actions, focusing on maintaining optimal selection for end users.

Q: What is the expected impact of LIFO accounting on Q2 earnings, and how do you plan to address the $1.7 billion annualized gross impact of tariffs? A: (Patrick Hallinan, CFO) The LIFO impact in Q2 is estimated to be $200 million to $250 million. We plan to address the $1.7 billion impact through increased USMCA compliance and reducing dependency on China, which will be a significant part of our mitigation strategy.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

Terms and Privacy Policy

Your Privacy Choices

Utah Privacy Notice

More Info