Stanley Black & Decker (NYSE:SWK) shares are surging in the pre-market session today after the tools and outdoor products provider announced third-quarter numbers and raised its profitability outlook for the full year.
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During the quarter, revenue declined by 4.1% year-over-year to $3.95 billion, lagging estimates by $20 million. EPS of $1.05, on the other hand, outpaced expectations by a healthy margin of $0.22. The decline in the company’s top line was primarily due to volume declines in the Outdoor and DIY categories, coupled with customer destocking in attachment tools.
Nevertheless, the company’s adjusted operating margin expanded by 210 basis points to 8.3%, driven by $875 million in pre-tax savings from its global cost reduction program. Importantly, SWK is on track to achieve a savings run rate of $2 billion by 2025.
Next, the company is focusing on returning its adjusted gross margin to over 35%. Buoyed by promising business momentum, SWK has raised its profitability outlook for Fiscal Year 2023. The company now expects adjusted EPS for the year to be in the range of $1.10 to $1.40, compared to the previous outlook between $0.70 to $1.30. Free cash flow generation during the year is anticipated to be in the range of $0.6 billion to $0.9 billion.
What Is the Future of SWK Stock?
Overall, the Street has a Hold consensus rating on Stanley Black & Decker. The average SWK price target of $97.11 implies a substantial 25.7% potential upside.
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