Stanley Black & Decker (NYSE: SWK) reported Q4 EPS of $2.18, in-line with the analyst estimate of $2.18. Revenue for the quarter came in at $3.7 billion versus the consensus estimate of $3.78 billion.

• Full Year Revenues Totaled $14.4 Billion, Up 3% Versus Prior Year, With 3% Organic Growth
• Full Year Operating Margin Rate Was 12.2%; Excluding Charges, Full Year Operating Margin Rate Was 13.5%, Relatively Consistent Versus Prior Year Despite $445 Million In External Headwinds
• Full Year Diluted GAAP EPS Was $6.35; Excluding Charges, Full Year Diluted EPS Was $8.40, Up 3% Versus Prior Year
• Full Year Free Cash Flow Was $1.1 Billion, 113% Of Net Income
• 4Q'19 Revenues Totaled $3.7 Billion, Up 2% Versus Prior Year
• 4Q'19 Operating Margin Rate Was 11.8%; Excluding Charges 4Q\'19 Operating Margin Rate Was 13.6%, Up 30 Basis Points Versus Prior Year
• 4Q'19 Diluted GAAP EPS Was $1.32; Excluding Charges, 4Q\'19 Diluted EPS Was $2.18
• Expect 2020 Full Year Diluted GAAP EPS Of $8.05 To $8.35; Adjusted EPS Of $8.80 - $9.00; 2020 Free Cash Flow Conversion To Approximate 90%-100%

James M. Loree, President & CEO, commented, "Stanley Black & Decker delivered a strong 2019 overcoming approximately $445 million in external headwinds. We generated above-market organic growth of 3%, low single digit adjusted EPS growth and robust free cash flow in a dynamic operating environment.

"Growing and diversifying our Industrial business through M&A is a key priority for the Company and a focus of our strategic capital deployment. Today we are excited to announce the acquisition of CAM which is an ideal platform asset to scale within our Engineered Fastening business and significantly adds to our exposure in the high growth, high margin aerospace and defense segment. CAM is a quality asset bringing well-recognized brands, a proven business model, an experienced management team and compelling cash flow characteristics which create an attractive pathway for profitable growth and shareholder returns.

"Looking to 2020 and beyond, we remain well-positioned to deliver share gains as we leverage our robust growth catalysts, including Craftsman, e-commerce, revenue synergies across our portfolio, and new innovations. The organization is focused on generating margin accretion as we realize the benefits from our $200 million cost reduction program and implement our margin resiliency initiatives. We are energized to tackle what 2020 has in store as we leverage our proven operating system. We intend to act with speed and agility to deliver another successful year and continue to achieve our vision to (1) deliver top-quartile financial performance, (2) become known as one of the world\'s great innovators, and (3) elevate our commitment to corporate social responsibility."

GUIDANCE:

Stanley Black & Decker sees FY2020 EPS of $8.80-$9.00, versus the consensus of $9.00.

Allan added, "We delivered share gains in 2019 across much of the portfolio, EPS growth, and a strong free cash flow performance despite slowing global markets and the mid-year acceleration of tariff and currency-related inflation which resulted in $445 million of external headwinds. In 2020, we expect to generate above-market organic growth of approximately 3%, adjusted earnings per share expansion of 5% - 7% versus prior year, and continued strong free cash flow."

Management expects 2020 EPS to be $8.05 To $8.35 on a GAAP basis and $8.80 - $9.00 on an adjusted basis. Free cash flow conversion is expected to approximate 90%-100% of GAAP Net Income, reflecting the impact of restructuring payments associated with the 2019 cost reduction program.

The following represents key 2020 adjusted EPS assumptions:

• 2019 cost reduction program benefit (~ +$0.95)
• Organic growth of approximately 3% (~+$0.40 to +$0.50)
• Incremental tariffs and currency headwinds (~ -$0.60 to -$0.70)
• Tax rate, financing costs and other below the line items (~ -$0.25)

Allan continued, "The organization is focused on delivering margin expansion in 2020 by realizing the benefits of our previously announced cost actions and generating volume leverage to offset the carryover impacts from tariffs and currency. In addition, our margin resiliency program is in full execution mode, allowing us to withstand changes in the external environment or support further margin improvement going forward.

"We are confident that the Company is well positioned to deliver sustained above-market organic growth, operating margin expansion, strong free cash flow conversion and top-quartile shareholder returns over the long-term."

The difference between 2020 GAAP and adjusted EPS guidance is $0.65 - $0.75, consisting of acquisition-related and other charges. These forecasted charges primarily relate to restructuring, deal and integration costs, as well as Security business transformation and key margin resiliency initiatives.

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