Stanley Black & Decker(SWK) - 2021 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a record third quarter with 11% growth, primarily driven by 10% organic growth [7] - Adjusted earnings per share for the quarter was $2.77, down 4% year-over-year [13] - The overall adjusted operating margin rate was 12.2%, down from the prior year [12] Business Line Data and Key Metrics Changes - Tools segment generated 13% organic growth, attributed to strong demand and innovation [10] - Industrial segment grew 1% organically, impacted by lower auto production and aerospace market conditions [11] - Security segment delivered 8% organic growth, benefiting from a transformation to data-enabled technology [11] Market Data and Key Metrics Changes - North America tools and storage organic growth was up 9%, Europe up 20%, and emerging markets up 28% [39] - E-commerce revenue grew nearly 20% globally compared to 2020 [42] - Latin America saw 36% organic growth, while Asia experienced 22% organic growth [42] Company Strategy and Development Direction - The company is focusing on innovation, manufacturing, and automation to meet strong demand and fuel sustainable growth [15] - Recent acquisitions of MTD and Excel are expected to create a powerful growth engine in the outdoor category, with approximately $4 billion in revenue [16][17] - The company aims to leverage electrification trends in outdoor products and enhance its market presence [19][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in multi-year growth and margin expansion plans despite supply chain challenges [14] - The company anticipates significant growth opportunities in the residential and non-residential construction markets [15] - Management highlighted the importance of addressing inflation and supply chain costs through pricing and productivity actions [60][61] Other Important Information - The company is investing approximately $200 million in innovation and growth projects [26] - Free cash flow for the third quarter was a use of cash of $125 million, with expectations for strong fourth-quarter cash performance [54] - The company expects full-year organic revenue growth of 16% to 17% and adjusted EPS expansion of 22% [63] Q&A Session Summary Question: Confidence in surcharge implementation - Management is confident that the surcharge will be implemented in Q4, supported by solid customer feedback [81] Question: Pricing dynamics in North America - The company is executing a 4.5% to 5% price increase and is prepared for potential further price actions in Q1 2022 [87][88] Question: Volume growth confidence for 2022 - Management expressed high confidence in achieving mid-single digit organic volume growth, driven by strong demand and new product introductions [90][92] Question: Operating margin expectations - Management confirmed expectations for a firm-wide operating margin of around 11% in Q4, with gradual improvements anticipated in 2022 [100] Question: Competitive pricing response - Management noted that competitors are also implementing price increases due to similar cost pressures, indicating a shared industry challenge [103][104]