Stanley Black & Decker Inc. (SWK) issued $400 million of 5.2% notes on August 31. The notes, offered for a price of 99.925%, will mature on September 1, 2040, as guaranteed by Black & Decker Corporation.
The interest will be paid semi-annually on March 1 and September 1, with the first payment falling on March 1, 2011. Management expects its rating from S&P to be A (negative outlook); from Moody’s to be Baa1 (Stable outlook); and from Fitch to be A- (stable outlook).
Stanley Black & Decker is a manufacturer of tools and engineered security solutions. In the second quarter of 2010, the company reported earnings per share from continuing operations of $1.24, up 39.3% compared with 89 cents in the comparable quarter of 2009. EPS surpassed the Zacks Consensus Estimate of 77 cents.
Net revenue in the second quarter of 2010 was $2,365.6 million, up 157.4% year over year compared with $919.2 million in the year-ago quarter. Quarter ending, long-term debt, net of current portion was $2,318.7 million, down 15.5% from $2,743.4 million in the first quarter of 2010. Cash and cash equivalents were approximately $1,598.4 million compared with $1,505.4 million in the first quarter of 2010.
For FY10, management expects earnings per share to be within $3.35–$3.55 range and net organic revenue growth to be roughly in the range of 4% to 5%.
We believe Stanley Black & Decker embarks on a growth strategy of shifting its business portfolio toward favored growth markets through acquisitions and divestitures. Recently, in March 2010, the company closed the acquisition of ADT France and thereby secured the leading market share in France and expanded its security footprint in Europe. Moreover, in the same month, Black & Decker Corporation was acquired, which the company hopes will support the continued expansion of the company’s global business platform.
Moreover, management appears to be quite optimistic about the expansion prospects of its five strategic growth platforms including Convergent Security, Mechanical Security, Engineered Fastening, Infrastructure and Healthcare. The company targets infrastructure platform to grow roughly $1–$2 billion in over 5 to 7 years, focusing primarily on specialized tools, equipment and services for commissioning, repair and maintenance of infrastructure in areas such as oil and gas, transportation, water and sewer, and power systems.
The recently acquired CRC-Evans complements the company’s intention to grow its Infrastructure platform by gaining exposure in the oil and gas infrastructure industry.
Trailing four quarters, the company has outperformed the Zacks Consensus Estimate, as evident from an average 31.28% earnings surprise. Earnings per share estimates for 2010 and 2011 at present stands at $3.60 and $4.61, representing year-over-year growth of 28.7% and 27.8%, respectively.
We currently maintain our Outperform recommendation on the stock, as supported by Zacks #1 (Strong Buy) Rank.
STANLEY B&D INC (SWK): Free Stock Analysis Report
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