Why Stanley Black & Decker? (SWK)

Shares of Stanley Black & Decker, Inc. SWK could be very attractive here, if you believe the bull case. The company recently reported strong earnings, handily beating Wall Street estimates, as well as raising guidance for 2011. The company has generated $425 million in synergies with its merger of Black & Decker, and just announced it would be raising its dividend as a result of this, as I had earlier suggested it would. Stanley Black & Decker's President and CEO, John F. Lundgren, commented, “2010 was a landmark year for Stanley Black & Decker, driven largely by the significant progress we made in integrating Black & Decker. Notably, we were able to achieve 7% organic growth for the year on a pro forma basis amid an uncertain economic environment while continuing the integration in a manner that allowed us to exceed our original cost synergy targets. Our early success to date notwithstanding, we remain focused on effectively navigating the risks and challenges inherent in the integration projects that remain while embedding the Stanley Fulfillment System across the combined entity." Lundgren went on to say in the press release, "We realize that our continued success is dependent upon the ongoing integration of Black & Decker, which is now in a critical phase that includes intensive and often interdependent systems conversions as well as changes within our plant and distribution center networks. Creating additional shareholder value from the successful integration remains management's top priority.” What is particularly interesting now is that Home Depot HD and Lowe's LOW both said that tool sales were exceptionally strong, and Stanley Black & Decker products are sold in both locations. Stanley Black & Decker should continue to benefit as America starts to spruce up their homes more and more. We are seeing a bit of a turnaround in housing, but this may take another year or so, given the data. Given the fact that Stanley Black & Decker will benefit from the rise of remodelings as well as new homes, this is a win-win situation here. Brian Sozzi, of Wall Street Strategies, slapped a $100 price target on the stock, and has been very positive on the name since the merger was announced a couple of years ago. If you believe that the company is likely to continue to benefit from its synergies from the merger and is able to generate better than expected free cash flow, then this could potentially be a positive trade in your portfolio.