Stanley Black & Decker (SWK) Tops Q2 EPS by 53c, Beats on Revenues; Offers FY18 EPS Mid-Point Outlook Above Consensus

Stanley Black & Decker (NYSE: SWK) reported Q2 EPS of $2.57, $0.53 better than the analyst estimate of $2.04. Revenue for the quarter came in at $3.6 billion versus the consensus estimate of $3.5 billion.

• 2Q'18 Revenues Totaled $3.6 Billion, Up 11% Versus Prior Year, Headlined By 7% Organic Growth
• Price Actions In Response To Commodity Inflation And Currency Yielded 1 Point Of Organic Growth
• 2Q'18 Diluted GAAP EPS Was $1.93; Excluding Charges, 2Q'18 Diluted EPS Was $2.57, As Price, Lower Expenses And Volume Leverage More Than Offset The Dilutive Earnings Impact Of Commodity Inflation And Currency
• Completed $200 Million Share Repurchase In April 2018
• Revising 2018 Full Year Diluted GAAP EPS Guidance Range To $7.00 - $7.20 From $7.40 - $7.60 Reflecting The Impact Of The Recently Announced EPA Settlement
• Reiterating Adjusted EPS Guidance Range Of $8.30 - $8.50 And Free Cash Flow Conversion Of Approximately 100%

Updated 2018 Outlook

Management is revising its 2018 EPS outlook to $7.00 - $7.20 from $7.40 - $7.60 on a GAAP basis reflecting the recently announced settlement with the Environmental Protection Agency regarding the remediation of the Centredale Superfund site. More detail can be found in the 8-K filed by the Company on July 9, 2018.

The Company is reiterating its adjusted EPS range of $8.30 - $8.50 and its free cash flow conversion estimate of approximately 100%.

The following reflects the key assumption changes to the Company\'s prior EPS outlook:

• Incremental price, cost and productivity actions (+~ $0.48)
• Higher organic volume expectations (+1 point or +~$0.12)
• Benefits from the $200 million share repurchase executed in 2Q (+~ $0.10)
• Foreign currency impacts from the strengthening of the U.S. dollar during the second quarter (-~$0.40)
• Higher commodity inflation expectations, including the impact from the initial $34 billion of section 301 tariffs (-~ $0.30)

Donald Allan Jr., Executive Vice President and CFO, commented, "We are taking price and cost actions to protect our margins in the face of approximately $320 million of transitory headwinds while delivering strong organic growth of 7% and adjusted earnings per share growth of 11% - 14% in 2018. The organization remains focused on strong day-to-day execution and operational excellence, which includes price realization, productivity and cost management, the rollout of the Craftsman brand and the successful integration of our recent acquisitions. We believe the Company is well positioned to deliver sustained above-market organic growth with operating leverage, strong free cash flow conversion and top-quartile shareholder returns over the long-term."

GUIDANCE:

Stanley Black & Decker sees FY2018 EPS of $8.30-$8.50, versus the consensus of $8.38.

For earnings history and earnings-related data on Stanley Black & Decker (SWK) click here.

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