Stanley Black & Decker (NYSE:SWK) stock rallied Wednesday after the toolmaker reported better-than-expected third-quarter earnings, largely in-line revenue and raised its full-year outlook.
The toolmaker reported adjusted earnings of $2.31 per share, including a 67-cent net tariff refund benefit. Earnings beat Wall Street’s estimate of $1.56 per share.
Revenue fell 1% year over year to $3.732 billion, largely in line with Wall Street’s estimate of $3.741 billion. Organic revenue rose 4%, supported by stronger sales volumes.
GAAP earnings increased 34 cents to $1.83 per share.
Stanley Black & Decker’s Margins Jump
Sales volume rose 6%, while pricing declined 2%. Portfolio changes reduced sales by 4%.
Gross margin expanded 760 basis points to 39%, while adjusted gross margin rose 780 basis points to 39.4%.
Net tariff refunds contributed about 430 basis points to both margins.
During the earnings call, management said tariff refunds allowed the company to accelerate investments in marketing, brand building and personnel.
The company expects selling, general and administrative expenses to return to about 23% of sales in 2027 as one-time costs decline.
Tools & Outdoor Leads Growth
Tools & Outdoor sales rose 2% to $3.336 billion. Organic revenue increased 4%, driven by power tools and strong demand across U.S. retail, commercial and industrial channels.
Adjusted segment margin expanded 560 basis points to 17.6%, helped by productivity gains and a favorable product mix.
Engineered Fastening sales fell 21% to $396 million, mainly due to the CAM divestiture.
However, organic revenue rose 2% as industrial demand partly offset weakness in automotive markets. Adjusted segment margin declined 110 basis points to 11.7%.
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CEO Chris Nelson said the company’s promotional strategy helped drive Tools & Outdoor sales volumes without hurting profitability.
Nelson also warned that rising metals and resin costs could prompt price increases in 2027.
“We will be looking to supplement our productivity with price as we come out of the year,” Nelson said.
Management also sees opportunities to improve margins by streamlining its global manufacturing operations and increasing capacity utilization.
CFO Patrick Hallinan said inflationary pressures have intensified over the past three months, particularly for steel and electrical components.
He warned that the company expects significant cost pressures in 2027, regardless of whether tariffs rise, and could raise prices around the start of the year to offset higher costs.
Stanley Black & Decker Announces $1 Billion Buyback
Operating cash flow reached $659 million, while free cash flow totaled $585 million.
The company repurchased about 2.5 million shares for $250 million during the quarter, completing its previous buyback authorization.
Its board also approved a new share repurchase program of up to $1 billion.
Stanley Black & Decker Raises 2026 Outlook
The company raised its 2026 GAAP earnings forecast to $5.45-$5.85 per share from $4.60-$5.45. Wall Street expects $5.65 per share.
Stanley Black & Decker also increased its adjusted earnings forecast to $5.95-$6.25 per share from $5.20-$5.80.
The company now expects free cash flow of $1 billion-$1.2 billion, up from its previous forecast of $600 million-$800 million.
For the fourth quarter, management expects revenue of about $3.6 billion, adjusted earnings of roughly $1.45 per share and adjusted gross margin of 34%-35%.
SWK Price Action: Stanley Black & Decker shares were up 12.21% at $117.39 at the time of publication on Wednesday. The stock is trading at a new 52-week high, according to Benzinga Pro data.
Photo by Piotr Swat via Shutterstock
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