Stanley Black & Decker, Inc. - Momentum

Stanley Black & Decker, Inc. (SWK) recently rebounded from a key trend line after reporting better than expected Q2 results in late July that included a 61% earnings surprise. Estimates have since jumped higher, with the next-year estimate now projecting 27% growth.

Company Description

Stanley Black & Decker, Inc. manufactures tools and engineered security solutions worldwide. Stanly and Black & Decker merged in March of 2010, where the combined company now has a market cap of $9 billion.

Stanley and Black & Decker merged their two respective businesses in March of 2010, and we are now beginning to see the synergies created with the strategic alliance after the newly formed company delivered better than expected Q2 results on July 21.

Second-Quarter Results

Revenue for the period was up 157% from last year, with the inclusion of Black & Decker accounting for 145% of that growth. Earnings also came in strong at $1.24, 61% ahead of the Zacks Consensus Estimate, pushing the company's average earnings surprise over the last four quarters to 31%.

The company saw some solid production on the margin front too, with gross margin ticking up to 37.7%, a Q2 record for legacy Stanley.

CEO John Lundgren commented on the merger of the two companies, saying, "We continue to be encouraged by how well the integration with Black & Decker is progressing and we remain firmly on track with our cost synergy estimate of $350 million, $90 million of which will be recognized in 2010."

Balance Sheet

The combined companies have a pretty solid cash and equivalents position of $1.6 billion against total debt of $3.1 billion.

Estimates

With Stanley Black & Decker raising guidance on the good quarter, estimates took a nice jump higher, with the current year adding 33 cents to $3.64 and the next year adding 26 cents to $4.61, a bullish 27% growth projection.

Valuation

Not only does SWK have some solid upward momentum, it also have value, trading with a forward P/E of 15X against its peers 17X.

2-Year Chart

SWK recently rebounded from a long-term trend ahead of the solid quarter to move back within range of the multi-year high at $66.27. Look for support from the trend on any weakness, take a look below.

Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the new Zacks Momentum Trader Service.
 
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