Company Performance - Stanley Black & Decker reported positive results in Q1, highlighting organic year-over-year growth and margin expansion [5] - The company achieved above-market growth for DEWALT for another consecutive quarter, indicating strong brand performance [5] - The transformation process is on track for completion by the end of the year, establishing a solid foundation for future growth [5] Conference Context - The discussion took place at the Wolfe Research 18th Annual Global Transportation & Industrials Conference, transitioning from a focus on transportation to industrial topics [1] - Chris Nelson, COO, and Dennis Lange, Head of Investor Relations, represented Stanley Black & Decker during the conference [2]

Summary of Conference Call Company Overview - The conference call pertains to **Stanley Black & Decker**, a company involved in tools and outdoor products, discussing its recent performance and strategic direction. Key Points and Arguments Financial Performance - The company reported **organic year-over-year growth** and **margin expansion** in Q1, indicating progress in its transformation efforts [1] - The impact of tariffs on the company was initially estimated at **$1.7 billion**, which has now been reduced to an annualized range of **$500 to $600 million**, reflecting a positive shift in the trade environment [2][3] - The anticipated headwind from tariffs has decreased from **75 cents** to approximately **40 cents** per share, indicating improved financial conditions [2] Strategic Initiatives - The company is focused on achieving **35% plus gross margins** and is committed to a growth culture [5] - A significant transformation in the supply chain has been implemented to enhance productivity and efficiency, which is expected to yield long-term benefits [6][9] - The organizational structure has shifted to focus on brand management, allowing for better alignment with customer needs and driving demand for core brands like **DeWalt, Stanley, and Craftsman** [10][11] Supply Chain and Production - The company is actively reducing its reliance on China for U.S. consumption, aiming to be effectively out of China within **12 to 24 months** [20] - The strategy includes leveraging production capabilities in **Mexico** and ensuring compliance with **USMCA** regulations [21][33] - The company is working to simplify its manufacturing footprint and improve inventory turnover, with current inventory days at **150**, compared to pre-pandemic levels of **120-130** [44][45] Market Conditions - There is a noted strength in the professional market segment compared to the DIY segment, which remains soft due to economic instability [29] - The company anticipates that improvements in the economy and interest rates will eventually lead to increased consumer activity in the DIY sector [30] Pricing Strategy - The pricing environment is described as volatile, with the company committed to maintaining service levels and inventory flow to support customers [18] - The company has a flexible pricing strategy that can be adjusted based on market conditions and tariff impacts [22][24] Portfolio Management - The company is in the process of portfolio cleanup, focusing on divesting non-core assets to streamline operations and improve cash generation [51][52] Additional Important Content - The company has centralized its engineering organization to enhance innovation and product development efficiency [12][13] - There is a focus on building a more diverse and flexible production strategy across various geographic locations, including **Vietnam** and **India** [33] - The management expressed confidence in the talent and team dynamics within the company, which is crucial for executing its strategic vision [14] This summary encapsulates the essential insights from the conference call, highlighting Stanley Black & Decker's financial performance, strategic initiatives, market conditions, and operational adjustments.

Investment Rating - The industry investment rating is "Positive" and maintained [11] Core Viewpoints - Overseas companies are actively responding to the impact of US tariffs through various strategies such as inventory preparation, supply chain adjustments, price increases, and internal cost control [10][19] - Different companies are experiencing varying degrees of price adjustments, with Stanley Black & Decker already implementing price increases and expecting further hikes in Q3, while others like Amazon and Rational have yet to raise prices but may need to do so to alleviate cost pressures [10][19] - Companies have generally stocked up on inventory before the tariffs took effect to mitigate cost pressures [10] Summary by Relevant Sections Tools Sector - Stanley Black & Decker plans to mitigate tariff impacts through supply chain adjustments, price increases, and collaboration with the US government. Approximately 15% of its supply chain is from China, and the company aims to adjust this over 12-24 months [17][19] - The company has already raised prices in April 2025 and anticipates further increases in Q3 2025 [17] Aerial Work Platforms - Oshkosh manufactures nearly all its products sold in the US domestically and is using supply chain adjustments and cost control to mitigate tariff impacts. The company reports healthy market demand and order levels [22][23] - Terex's Genie brand sources about 90% of its AWP products from the US and Mexico, and the company is also taking steps to minimize tariff impacts through inventory preparation and supply chain adjustments [28][30] Technology Sector - Apple expects limited impact from tariffs on its Q1 2025 performance, with a projected cost increase of $900 million due to tariffs. The majority of its products sold in the US will be sourced from India and Vietnam [40][41] - Amazon has not seen significant price increases in retail goods but anticipates potential price adjustments in the future to manage costs [44][45] Commercial Kitchen Equipment - Rational's products exported to the US are affected by a 10% additional tariff, but the company is focusing on efficiency improvements to avoid price increases. The company has not yet adjusted prices but may need to pass on some costs [51][52]

Core Viewpoint - Stanley Black & Decker's stock experienced a significant decline of 21.9% in April due to the impact of newly imposed tariffs, leading management to lower its full-year guidance for earnings and cash flow [1][2]. Financial Impact - The tariffs are expected to negatively affect earnings per share (EPS) by $0.75 in 2025, prompting a reduction in the full-year adjusted EPS guidance from $5.25 to $4.50 [2]. - The forecast for free cash flow in 2025 has been lowered from $750 million to $500 million [2]. - The adjusted cost of sales in the U.S. is approximately $6.8 billion, with significant portions sourced from China and Mexico, which are subject to tariffs [5]. Market Valuation - The revised estimates suggest a stock valuation of 13.6 times earnings in 2025 and 19 times free cash flow, which may be attractive if 2025 is a trough year and management's mitigation strategies are effective [3]. Supply Chain Challenges - The company faces challenges in reshaping its supply chain due to the tariffs, which will require time and effort to implement [5]. - Substantial tariffs are also affecting other Asian suppliers, complicating sourcing adjustments [6]. Sales and Inflation Concerns - Price increases already implemented by the company may negatively impact sales, while potential inflation from tariffs could lead to higher interest rates and reduced demand for tools and fasteners [7]. Investment Consideration - Despite the justified sell-off, the stock may present a decent value if the company can adapt and meet its revised full-year guidance [8].

Core Viewpoint - Stanley Black & Decker reported better-than-expected earnings but faced revenue decline and rising cost pressures due to tariffs, leading to a negative market reaction [1][2]. Financial Performance - The company earned $0.75 per share, exceeding the consensus estimate of $0.66 per share [2]. - Revenue for the quarter was $3.7 billion, down 3% year-over-year, impacted by currency headwinds and business divestitures [2][3]. - Full-year earnings per share are expected to be around $4.50, significantly below Wall Street's consensus of $4.91 [3]. Segment Performance - Sales in the tools segment, the largest for the company, remained flat [3]. - Fastener sales experienced a decline of 21% due to divestitures and weakness in the automotive sector [3]. Cost Management and Strategy - The company is on track to achieve its long-term $2 billion cost-savings plan, with $500 million expected to be realized by 2025 [4]. - Adjustments to pricing and supply chains are being made in response to tariff concerns [4][5]. Market Outlook - The CEO indicated that the company is actively monitoring tariff policies and is making necessary adjustments to minimize impacts on end users while protecting the business [5]. - Over the past year, shares of Stanley Black & Decker have decreased by 35%, and the company currently offers a 5% dividend yield [5].

Core Insights - Stanley Black & Decker, Inc. reported first-quarter 2025 adjusted earnings of 75 cents per share, exceeding the Zacks Consensus Estimate of 68 cents, with a year-over-year increase of 33.9% [1] - The company's net sales reached $3.74 billion, surpassing the consensus estimate of $3.73 billion, although it represented a decline of 3.2% year over year due to weaknesses in both segments [1] Segment Performance - Revenues from the Tools & Outdoor segment totaled $3.28 billion, a slight decrease of 0.1% year over year, compared to an estimate of $3.21 billion [2] - The Engineered Fastening segment generated revenues of $463.7 million, down 20.7% year over year, against an estimated $489.3 million [2] Margin Analysis - The cost of sales decreased by 5% year over year to $2.62 billion, while gross profit increased by 1.1% to $1.12 billion, resulting in a gross margin increase of 130 basis points to 29.9% [3] - Selling, general and administrative expenses rose by 1.8% year over year to $867.0 million, with adjusted EBITDA growing by 5.6% to $361.8 million, leading to a margin increase of 80 basis points to 9.7% [3] Balance Sheet and Cash Flow - At the end of the first quarter, cash and cash equivalents stood at $344.8 million, up from $290.5 million at the end of the fourth quarter of 2024, while long-term debt decreased to $4.76 billion from $5.6 billion [4] - Net cash used in operating activities was $420.0 million, down 2.6% year over year, with capital and software expenditures totaling $65 million, slightly down from $65.7 million a year ago [5] Future Guidance - The company anticipates total revenues to increase in low single digits and expects earnings to be around $3.30 (+/- $0.15) per share, a decrease from the previous expectation of $4.05 (+/- $0.65) [6] Zacks Rank - Stanley Black & Decker currently holds a Zacks Rank 3 (Hold) [7]

Core Insights - Stanley Black & Decker reported revenue of $3.74 billion for the quarter ended March 2025, a decrease of 3.2% year-over-year, but exceeded the Zacks Consensus Estimate by 0.37% [1] - The company's EPS was $0.75, up from $0.56 in the same quarter last year, representing a surprise of 10.29% over the consensus estimate of $0.68 [1] Financial Performance - Net Sales for Tools & Outdoor segment were $3.28 billion, slightly above the five-analyst average estimate of $3.26 billion, with a year-over-year change of -0.1% [4] - Normalized operating profit for Corporate overhead was reported at -$68.40 million, worse than the average estimate of -$60.80 million from four analysts [4] - Normalized operating profit for Tools & Outdoor was $314.20 million, exceeding the average estimate of $310.44 million from four analysts [4] Stock Performance - Shares of Stanley Black & Decker have declined by 19.5% over the past month, compared to a -0.2% change in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market in the near term [3]

Company Performance - Stanley Black & Decker reported quarterly earnings of $0.75 per share, exceeding the Zacks Consensus Estimate of $0.68 per share, and up from $0.56 per share a year ago, representing an earnings surprise of 10.29% [1] - The company posted revenues of $3.74 billion for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 0.37%, although this is a decline from year-ago revenues of $3.87 billion [2] - Over the last four quarters, Stanley Black & Decker has surpassed consensus EPS estimates four times and topped consensus revenue estimates three times [2] Stock Performance - Stanley Black & Decker shares have declined approximately 23.7% since the beginning of the year, compared to a decline of 5.5% for the S&P 500 [3] - The current consensus EPS estimate for the upcoming quarter is $1 on revenues of $4.02 billion, and for the current fiscal year, it is $5.14 on revenues of $15.3 billion [7] Industry Outlook - The Manufacturing - Tools & Related Products industry, to which Stanley Black & Decker belongs, is currently ranked in the bottom 23% of over 250 Zacks industries, indicating potential challenges ahead [8] - The performance of Stanley Black & Decker's stock may be influenced by the overall outlook for the industry, as research indicates that the top 50% of Zacks-ranked industries outperform the bottom 50% by more than a factor of 2 to 1 [8]

Financial Data and Key Metrics Changes - The company reported total revenue of $3.7 billion for Q1 2025, consistent with plans, with organic growth of 1% driven by solid outdoor performance [11][12] - Adjusted gross margin improved to 30.4%, up 140 basis points year-over-year, despite pressures from freight inflation and tariffs [12][13] - Adjusted earnings per share was 75 cents, reflecting a 34% increase compared to the previous year [13] Business Line Data and Key Metrics Changes - Tools and Outdoor segment revenue was approximately $3.3 billion, flat year-over-year, with organic revenue growth of 1% driven by volume, particularly from the DEWALT brand [19][20] - Engineered Fastening segment revenue decreased by 21% year-over-year, with a slight organic revenue decline of 1% due to various pressures including a divestiture and volume pressures [24][25] Market Data and Key Metrics Changes - North America recorded a 2% organic revenue increase, reflecting stable demand trends, while Europe showed flat organic growth amid a weak market backdrop [22] - The rest of the world experienced a 3% organic revenue decline, primarily due to strong growth comparisons from the previous year in Latin America [23] Company Strategy and Development Direction - The company is focused on completing its transformation in 2025, aiming for $2 billion in savings, while continuing to invest in growth and innovation [13][16] - A three-pronged execution plan is in place to address trade policy changes, including supply chain mitigation, price increases, and engagement with the US administration [7][8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the dynamic trade environment, preparing for multiple demand scenarios while maintaining a focus on execution and cash generation [14][15] - The company anticipates significant price increases due to tariffs and is actively engaging with channel partners to manage these changes [17][35] Other Important Information - The company has reduced its manufacturing footprint in China and is leveraging flexible supply chain hubs in the US, Mexico, and Southeast Asia [8][34] - The anticipated headwind from tariffs for 2025 is estimated at approximately 75 cents on an adjusted EPS basis, with ongoing efforts to mitigate this impact [36][42] Q&A Session Summary Question: Why is Mexico only one-third USMCA compliant? - The company is operationalizing plans to increase USMCA compliance, which involves straightforward adjustments that were not previously cost-effective [56] Question: How will the $1.7 billion tariff impacts be offset? - The majority of near-term mitigation will come from price increases, with SG&A expense management also playing a role [60] Question: What is the expected impact of LIFO accounting in Q2? - The LIFO impact in Q2 is estimated to be between $200 million to $250 million, affecting the cost of goods sold [85]

Financial Data and Key Metrics Changes - The company reported total revenue of $3.7 billion for Q1 2025, consistent with plans, with organic growth of 1% driven by strong outdoor performance [11][12] - Adjusted gross margin improved to 30.4%, up 140 basis points year-over-year, attributed to supply chain efficiencies and new product innovations [12][13] - Adjusted earnings per share increased by 34% to $0.75, while adjusted EBITDA margin approached 10%, up approximately 80 basis points from the previous year [13][14] Business Line Data and Key Metrics Changes - Tools and Outdoor segment revenue was approximately $3.3 billion, flat compared to Q1 2024, with organic revenue growth of 1% driven by volume, particularly from the DEWALT brand [20][21] - Engineered Fastening segment revenue decreased by 21% year-over-year, with a slight organic revenue decline of 1%, impacted by the divestiture of the infrastructure business and volume pressures in the automotive sector [25][26] Market Data and Key Metrics Changes - North American end market demand remained stable, with a 2% organic revenue increase in the Tools and Outdoor segment [23] - European organic growth was flat, while the Rest of World segment saw a 3% decline, primarily due to tough comparisons from robust growth in Latin America last year [24] Company Strategy and Development Direction - The company is focused on completing its transformation in 2025, aiming for $2 billion in savings, while continuing to invest in growth and innovation [13][18] - A three-pronged execution plan is in place to address trade policy changes, including supply chain mitigation, price increases, and collaboration with the US administration [8][10] - The company is enhancing its supply chain flexibility, reducing reliance on China, and increasing USMCA compliance [33][35] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the dynamic trade environment, preparing for multiple demand scenarios while maintaining a focus on execution and cash generation [14][15] - The company anticipates significant price increases due to tariffs, with an estimated $0.75 headwind on adjusted EPS for 2025 [44][50] - Management remains committed to long-term shareholder value creation despite near-term challenges posed by tariffs [52] Other Important Information - The company achieved approximately $130 million in pretax run rate cost savings in Q1, totaling $1.7 billion since the program's inception [28] - The company is actively pursuing new commercial opportunities and enhancing service for end users, particularly in markets like Saudi Arabia [29][30] Q&A Session Summary Question: Concerns about USMCA compliance and tariff rates - Management acknowledged that current USMCA compliance is below one-third and is working on operationalizing plans to improve this [57][58] - The tariff rate for the rest of the world is currently 10%, based on existing policy [59] Question: Breakdown of tariff impacts and mitigation strategies - The majority of near-term mitigation is expected to come from price increases, with SG&A expense management also playing a role [61][62] Question: Phasing of tariff impacts and free cash flow - Significant tariff expense burden is anticipated in Q2, with pricing expected to catch up by early Q3 [69] Question: Pricing increases and retail partner conversations - A high single-digit price increase has been implemented, with further discussions ongoing for additional increases [74][76] Question: Inventory levels and potential destocking - Inventory levels are viewed as normalized, with potential destocking risks primarily focused on specific product lines and retailers [93]