Stanley Black & Decker Shares Tick Down on Q4 Earnings Results

The company reported its North American security segment organic revenues declined 6% due primarily to lower volumes within the commercial electronic security business as 4Q’14 benefited from a large retail installation.

NEW BRITAIN, Conn – Shares of Stanley Black & Decker (NASDAQ: SWK) declined more than 7% in mid-morning trading on Thursday, after the company reported revenue that came in below analysts’ expectations for the 2015 fourth quarter.

Also pressuring the stock, the company has forecast a continuation of the challenging macroeconomic conditions into this year. The strong dollar also negatively impacted the company, based here.

For the most recent quarter Stanley Black & Decker reported earnings of $1.78 per share on revenue of $2.8 billion, a 5% decline from the same period in 2014.

Analysts surveyed by Thomson Reuters had been anticipating earnings of $1.76 per share on revenue of $2.94 billion for the period.

“As we look forward, we believe we are well positioned to manage through a continued difficult environment by leveraging our world-class franchises and brands to deliver solid organic growth and strong free cash flow while maintaining our disciplined and shareholder friendly approach to capital allocation,” company CEO John Lundrgen said in a statement.

Stanley B&D’s net sales declined 4.6% year over year to $2.85 billion in fourth-quarter 2015. Also, the top line lagged the Zacks Consensus Estimate of $2.94 billion. The company said organic revenues grew 1% as a result of favorable pricing, offset by unfavorable currency translation impact of 6%.
For 2015, Stanley B&D generated net sales of $11.17 billion, down 1.5% year over year. The company reports revenue under the following three market segments:

The tools & storage segment generated revenues of $1.83 billion, down 2.6% year over year and represented 64.3% of net revenue in the quarter. Industrial segment’s revenues, accounting for roughly 16.7% of net revenue, came in at $476.5 million, down 7% year over year. Revenues from the security segment, roughly 18.9% of net revenue, decreased 8.8% year over year to $538 million.

The company reported the following for its security segment:

Higher installation revenues in a number of countries and a stable recurring revenue portfolio resulted in Europe posting organic growth of 3%, Europe’s fifth consecutive quarter of flat or positive organic growth. Order rates in Europe were again strong, up double-digits, while recurring revenue attrition remained solidly within the target range of 10-12%.

North America’s organic revenues declined 6% due primarily to lower volumes within the commercial electronic security business as 4Q’14 benefited from a large retail installation. Similar to Europe, orders within the North American commercial electronic security business were strong. Emerging markets organic revenues declined due to the ongoing relatively weak market conditions in China.

Overall security segment profit rate was 12.8%, up 100 basis points versus prior year, primarily due to improved operating performance within Europe. The segment profit rate improved 90 basis points sequentially as a result of continued margin expansion within Europe and improved operating performance in the North America business.

“Our security business demonstrated another quarter of forward progress. Europe delivered positive organic growth, year-over-year margin improvement with margins approaching 10%, strong order rates and attrition at targeted levels for the quarter,” Lundrgen said. “Our focus within Security North America remains squarely on improving field productivity where we took another step forward in the quarter evidenced by sequential margin improvement.”

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