Stanley Black & Decker's Guidance Doesn't Bode Well For Industrials

Seen by many investors and analysts as a relatively safer play in industrials for 2019, Stanley Black & Decker (SWK) was hammered (down 15%) after reporting earnings, as investors saw more than a few alarming items in the company’s guidance pertaining to some major industrial end-markets. Given the acknowledgement of weakening conditions in key markets like autos and residential housing, not to mention some limits on pricing amid ongoing cost pressure, I expect investors are going to be paying much closer attention to names like Illinois Tool Works (ITW), Ingersoll-Rand (IR), and 3M (MMM) in this earnings/guidance cycle.

As for Stanley Black & Decker itself, the shares do look undervalued, but the back-end loaded guidance for the year and the margin challenges make it a tough call right now, as there could be at least one more cut to guidance before this is over. I’d also note that Stanley Black & Decker hasn’t exactly been a standout either when it comes to metrics like free cash flow growth, despite ongoing cost reduction efforts.

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Stanley Black & Decker's Guidance Doesn't Bode Well For Industrials