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Stanley Black & Decker, Inc. SWK is poised to benefit from its cost-reduction program, which is expected to aid the bottom line and drive margins. The program comprises a series of initiatives to resize the organization, reduce inventory and optimize the supply chain for pursuing sustainable long-term growth.
Since its inception in mid-2022, this program has generated roughly $1.4 billion in pre-tax run-rate savings and reduced inventory by more than $2 billion. The company is expected to generate pre-tax run rate savings of $2 billion by the end of this year, with an adjusted gross margin of more than 35% in the long term.
Stanley Black remains open to divesting its non-core operations to focus on its core businesses and drive growth. For instance, in April 2024, the company divested its STANLEY Infrastructure business to Epiroc AB for a cash consideration of $760 million. The divestment will help the company to reduce debt and support capital-allocation priorities.
SWK remains committed to rewarding its shareholders handsomely through dividend payouts. In the first nine months of 2024, the company used $367.2 million for paying out dividends, reflecting an increase of 1.8% year over year. Also, in July 2024, the quarterly dividend was hiked by a penny to 82 cents per share.
However, the company has been witnessing lower consumer outdoor and do-it-yourself market demand. Within the Tools & Outdoor segment, the power tools business has been subject to a slowdown in the industrial sector. The weakening automotive end market, owing to headwinds in the global automotive OEM light vehicle production, is another setback.
SWK Stock’s Price Performance
Image Source: Zacks Investment Research
In the past month, this Zacks Rank #3 (Hold) company's shares have lost 5% compared with the industry’s 7.8% decline.
High debt levels remain another concern. Exiting the third quarter of 2024, the company’s long-term debt remained high at $5.6 billion. Its current maturities of long-term debt totaled $500.2 million. Also, its cash and cash equivalents at the end of the third quarter were $298.7 million, lower than the short-term borrowings of $387.4 million.
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