Stanley Black & Decker Reports Solid Earnings (SWK)

Stanley Black & Decker SWK reported a strong first quarter, beating Wall Street estimates on the top and bottom line. The company reported revenues of $2.4 billion and earnings of $1.08 per share, versus estimates of $2.37 billion and earnings of $1.01 per share. Stanley Black & Decker's President and CEO, John F. Lundgren, commented, “We remain enthusiastic about the prospects that 2011 holds for Stanley Black & Decker and feel confident we started the year in good stead. March 12th marked the one year anniversary of the Stanley Black & Decker combination. We are pleased with how the integration has progressed so far and are reiterating that the continuation of this success remains our top priority. As previously stated, our cost synergies are forecasted to be at an annualized rate of $460 million as we enter 2013, up from our original forecast of $350 million. Our plans to achieve $300 - $400 million in revenue synergies by 2013 remain on track and there was some compelling evidence of these opportunities in the first quarter, particularly in Latin America. Lastly, we were able to raise our dividend by 21% in February, expressing confidence in our future cash flows while providing evidence of our ongoing commitment to increasing shareholder value.” Executive Vice President and Chief Operating Officer, James M. Loree, commented, “We are pleased with the revenue and profit growth our Industrial segment illustrated, particularly the success of our Industrial and Automotive Repair businesses in only their second year as a unified, global platform. The cumulative results of our Security segment have a number of moving parts and hence blur a strong performance within CSS both on the top and bottom line despite a negative mix impact on segment profit. Within our CDIY segment, we continue to see exciting results from our lithium ion product line and have a very accretive portfolio of new products that will be introduced to the market later this year. In addition, as our sales and profits in Latin America increased over 20% versus the prior year, it is clear our high expectations for the company's revenue synergy capabilities are beginning to come to fruition in a powerful way. Lastly, the high level of inflation experienced for the quarter was anticipated and is consistent with our previous annual guidance. We have taken pricing actions across the company in affected areas in order to protect our margins.” The company is updating its previously communicated full year 2011 EPS guidance range to $5.00 - $5.25 from prior guidance of $4.75 - $5.00, excluding merger and acquisition related charges, due to tax rate favorability for the year. The tax rate is estimated to be 20% - 21%, down from the prior guidance of 25% - 26%. This update also includes the impact of a $250 million cash financed share repurchase, which the company plans to undertake during 2Q'11. Including all acquisition and Black & Decker merger-related charges, the company expects EPS to approximate $4.35 to $4.60 in 2011. Donald Allan Jr, Senior Vice President and CFO commented, “The first quarter marked the beginning of what should prove to be another solid year for Stanley Black & Decker. Outside of the powerful top and bottom line drivers that the integration will continue to provide, our successful new products and growing presence in the emerging markets also play a key role in our expected revenue and profit growth in 2011 and beyond. We still expect a net 100 basis point headwind due to commodity inflation and a 1/3 – 1/2 offsetting price recovery for the full year. However, we now anticipate significant negative price/inflation arbitrage in 2Q followed by approximately 80% recovery via price in the second half of this year as many of the price actions we have taken go into effect.”