Stanley Black & Decker, Inc.
CEO : Mr. Donald Allan Jr.
Quarterly earnings growth(YoY,%)
| Period | Revenue | Operating Income | EPS | Release Date |
|---|---|---|---|---|
| 2022 Q4 | 39.6% YoY | -133.4% | -117.0% | 2023-02-02 |
Don Allan says,
Q4 2022 Performance and Transformation
- Q4 2022 free cash flow: Generated more than $500 million of free cash flow in the fourth quarter.
- Full-year revenue: Full-year revenue reached $16.9 billion, up 11% versus a record of 2021, led by the outdoor power equipment acquisitions as well as 9% organic growth in the Industrial segment, and a 7% improvement in price realization.
- Full-year adjusted diluted earnings per share: The full year adjusted diluted earnings per share were down year-over-year to $4.62.
- Inventory reduction: Lowered inventory by $800 million, which supported a corresponding similar amount of reduction in the company’s debt, a key objective of their capital allocation plan in H2 2022.
- Transformation strategy: Continue to focus on advancing our simplification and transformation strategy.
2023 Guidance
- Revenue: Planning for a decline in volume versus 2022 as markets will continue to be challenged during 2023.
- Adjusted EPS: Guiding an adjusted EPS range of zero up to $2.
- Free cash flow: Free cash flow guidance is much stronger at $500 million up to $1 billion in 2023.
- Inventory reduction: Driving another $750 million up to $1 billion of inventory reduction during the year.
- EBITDA: Expecting our annualized EBITDA to achieve a run rate of close to $1.5 billion in the back half of 2023.
Innovation
- CRAFTSMAN and DEWALT: Introducing new CRAFTSMAN and DEWALT outdoor offerings, including lithium-ion electric ride-on mowers, brushless string trimmers, and blowers.
- FLEXVOLT product family: Expanding the FLEXVOLT product family with the launch of the world’s first cordless in-line SCS MAX Chipping Hammer and Cordless Hexbreaker Hammer, and the most powerful cordless DEWALT large angle grinder.
- CONVERGE partnership: DEWALT product team partnered with CONVERGE to develop and unveil new concrete DNA compatible sensors, tackling the challenge of reducing carbon emissions through product innovation.
Business Transformation
- Efficiency benefits: Realized $200 million of savings in the second half of 2022 from efficiency benefits, including the organizational changes, as well as indirect cost savings.
- SG&A savings: Expecting to deliver cumulative SG&A savings of $500 million by the end of 2023, covering simplification of the corporate structure, streamlined leadership spans of controls and organizational layers, and the reduction of indirect spend.
- Supply chain transformation: Line of sight to deliver cumulative savings beyond 2023 from the supply chain transformation program.
Don Allan says,
Price Model and Commodity Prices
- The price model has about 1.5 to 2 points for the year 2023.
- No significant deflation is seen in the basket of commodities.
- A little bit of inflation is expected in the first half of the year.
- Based on this, maintaining price throughout the year is possible.
Pricing Activities and Promotional Actions
- Normal promotional activity is expected in the spring, Father’s Day season, and later stages around Thanksgiving and other holidays at the end of the year.
- No need for unusual pricing activities to push things to the channel is seen in the plan today.
Inventory Levels in the Channel
- Inventory levels in the customers are reasonable and down a little bit from 2019 levels.
- The adequate amount of inventory in their stores has been gone into the year.
- Higher levels of inventory are in their own distribution network that they have to work through during 2023 and probably some early stages of 2024.
Q & A sessions,
Expected Slowdown in Organic Projection for Tools & Outdoor Business
- Forecasting a modest slowdown in activity for the Tools & Outdoor business in 2023, which is expected to continue in the back half of the year.
- Aligned with the industry trends and projections for housing starts and repair/remodel activities.
- Projected to be down somewhere between 3% to 5%, which is consistent with historical data.
Inventory Reduction Plan
- The reasonable level to pursue in inventory reduction is $750 million to $1 billion.
- Expected to get substantial chunks of inventory out in the first half of 2023 and in the fourth quarter, normal routine of the company.
- Goal is to get production levels back to normal in the back half of 2023.
- No major step down in inventory expected in 2024.
Dividend and Capital Allocation Strategy
- Dividend is a necessary part of the capital allocation strategy.
- No change in the dividend strategy at this stage.
- Buying back stock is not an option due to the leverage on the balance sheet.
Pricing and Competitors
- No major turbulence in the market around pricing from competitors during the fourth quarter.
- Saw some promotional activities to move inventory through some customers’ stores, but did not dramatically shift the pricing dynamic.
- Monitoring different pricing dynamics across various product families and categories.
Possible Impact on EPS and Supply Chain Transformation
- Possible $1 billion of value creation by the end of 2023 and another $1 billion related to the supply chain transformation in 2024 and 2025.
- Value creation in 2024 and 2025 is prorated over a three-year time horizon.
- Annualized projections put the EPS at around $5 for 2024, assuming the base case plays out.
- Possibility for higher EPS if demand is stronger than the base case.
No bad stock 