Stanley Black & Decker Q1 Earnings Call Highlights

Key Points

• Q1 beat expectations: Revenue rose about 3% year‑over‑year (organic flat) and adjusted EPS was $0.80, roughly $0.20 above the high end of prior guidance, while adjusted gross margin was 30.2% and adjusted EBITDA margin was 9.2%.
• CAM sale used to de‑lever: The April sale of the aerospace fasteners business generated roughly $1.57 billion of net proceeds that were largely applied to debt reduction, with management targeting around 2.5x net debt/adjusted EBITDA by year‑end and a capital allocation bias toward share buybacks (including a $500 million repurchase authorization).
• 2026 guidance and margin targets maintained: Adjusted EPS guidance of $4.90–$5.70 was reaffirmed (midpoint ~13% growth) with revenue slightly lower due to CAM timing, and the company reiterated a plan to expand gross margin (about +150 bps) and reach 35%+ adjusted gross margin by Q4 2026 (35–37% by end of 2028), while noting tariff changes and inflation roughly offset each other for the year.

Stanley Black & Decker NYSE: SWK reported what CEO Chris Nelson described as a “solid start to the year,” with first-quarter results coming in ahead of the company’s expectations on both revenue and earnings. Management reiterated its strategic focus on brand activation, operational excellence, and accelerated innovation, while also updating investors on portfolio actions, tariffs, and margin expectations for 2026.

First-quarter results topped expectations

Nelson said first-quarter revenue rose 3% year over year, while organic revenue was flat. He attributed the stronger-than-expected performance primarily to “a well-executed outdoor products preseason.”

On profitability, Nelson said adjusted gross margin was 30.2%, down 20 basis points year over year, while adjusted EBITDA margin was 9.2%, down 50 basis points. Adjusted earnings per share were $0.80, which CFO Patrick Hallinan said was $0.20 above the high end of the company’s prior guidance range.

Hallinan attributed about half of the EPS outperformance to “above the line operating outperformance…driven by Outdoor,” with the remainder coming from below-the-line items, including a first-quarter tax rate of 26% versus a 30% forecast due to “the timing of a discrete tax item.” He said the company did not change its full-year tax rate view of 19%.

Segment performance: Tools & Outdoor mixed; Engineered Fastening expanded

In Tools & Outdoor, first-quarter revenue was approximately $3.3 billion, up 2% year over year, while organic revenue declined 1%. Nelson said targeted pricing actions contributed 4% but were more than offset by 5% volume pressure, primarily tied to “lower retail activity in North America.” He also noted continued price moves by competitors and said the company “honed our approach to promotions for select products.”

Tools & Outdoor adjusted segment margin was 8.7%, which Nelson said was “consistent with our plan.” By product line, management said power tools organic revenue declined 2% and hand tools, accessory, and storage organic revenue declined 3%. Outdoor organic revenue increased 1%, driven by preseason sales for spring 2026, “particularly for ride-on and zero-turn mower offerings,” with Nelson citing “effective order fulfillment” early in the season.

Regionally, Tools & Outdoor organic revenue fell 2% in North America. Nelson highlighted “high single-digit organic growth” in the U.S. commercial and industrial channel, which he tied to growth investments aimed at professional end users. Europe organic revenue rose 1%, supported by growth in “prioritized investment markets” such as the U.K. and Eastern Europe, while rest-of-world organic revenue was flat, with Latin America’s double-digit growth offset by softer conditions in parts of Asia and the Middle East.

Engineered Fastening posted stronger growth, with first-quarter revenue up 10% reported and 7% organically. Management said organic growth was driven by 6% higher volume and 1% higher pricing, with currency providing a 3% tailwind. The aerospace business delivered 31% organic growth, and automotive grew 4% organically, which Nelson said outpaced the market due to strength in North America demand and global fastener systems for auto OEMs. General industrial fasteners declined low single digits organically.

Engineered Fastening adjusted segment margin was 12%, expanding 190 basis points year over year, which Nelson attributed primarily to improved profitability in aerospace and favorable automotive volume and mix.

CAM divestiture and capital allocation: debt reduction and share repurchases

Management also discussed the April 6 closing of the sale of its aerospace fasteners business, which Nelson said aligns with the company’s strategy to focus on core businesses and enhance shareholder value. He said the “vast majority” of the approximately $1.6 billion of net proceeds had already been used to reduce debt.

Hallinan provided more detail, saying net proceeds from the CAM transaction were approximately $1.57 billion after projected taxes and fees, and that most of the proceeds were applied toward debt paydown in the second quarter. He reiterated the company’s leverage target of 2.5 times net debt to adjusted EBITDA and said the company expects to be “at or around 2.5 times by year-end,” citing normal seasonality as the main reason it is not already there.

With a stronger balance sheet, Nelson said capital allocation is expected to be “biased towards share repurchases,” and Hallinan pointed to a $500 million share repurchase authorization as a source of flexibility.

2026 outlook maintained on EPS; revenue slightly lower on CAM timing

For 2026, Hallinan reaffirmed the company’s adjusted EPS outlook of $4.90 to $5.70, which he said represents 13% growth at the midpoint and is “consistent with our original adjusted earnings guidance.” The company now expects total revenue to be about flat year over year, “slightly lower than prior guidance because of the removal of CAM from the second quarter expectations,” while still projecting low single-digit organic revenue growth.

Hallinan said adjusted gross margin is expected to expand by about 150 basis points year over year, unchanged from prior guidance, supported by “top-line expansion, price, ongoing tariff mitigation efforts, and continuous operational improvement.” He added that the company expects SG&A to remain around 22% of sales and forecast free cash flow of $500 million to $700 million, including taxes and fees associated with the CAM divestiture. Excluding those payments, free cash flow is expected to be $700 million to $900 million, consistent with prior guidance.

By segment, the company expects Tools & Outdoor to deliver low single-digit organic growth in 2026, with second-quarter organic revenue also expected to rise low single digits as commercial initiatives gain traction and the company laps promotional disruption from the prior year. Engineered Fastening is expected to grow low single- to mid-single digits organically, which Hallinan said is “slightly lower than our prior guidance” due to having only one quarter of CAM contribution rather than two.

Tariffs, inflation, and margin path

Hallinan said tariff policy changes since the prior call led to new assumptions, and management now expects the net effect of tariff changes to be a gross tailwind versus the company’s assumptions at the beginning of the year. He described a temporary period of lower tariffs because replacement Section 122 tariffs are lower than former IEEPA tariffs, but said the company’s base case assumes “new Section 301 tariffs will be introduced at the same level as the old IEEPA tariffs,” bringing underlying tariff costs back to similar levels by August.

At the same time, Hallinan said inflationary pressures have risen in resins and freight since the start of the conflict in the Middle East, and he also cited “meaningful inflation” in battery metals and tungsten. He said these inflationary pressures “roughly offset the benefit from the tariff tailwind” for the year.

On Section 232 tariffs, Hallinan said the company assessed the incremental impact as “just $15 million on an annualized basis and less than $10 million for 2026,” noting that “broad industry headlines are not always good barometers” of the company’s actual profit-and-loss exposure.

In response to a question on the expected improvement in gross margin from the first half to the second half of 2026, Hallinan said the step-up is primarily driven by three factors beyond normal seasonality: net productivity benefits (about 40% of the change), adjustments to the fixed cost structure to match the current volume environment (another roughly 40%), and ongoing tariff mitigation efforts (about 20%). He added that the company remains committed to reaching adjusted gross margin of 35% or higher by the fourth quarter of 2026, with a longer-term target of 35% to 37% by the end of 2028.

For second-quarter 2026, management guided to net sales of around $3.9 billion, down slightly year over year due to the CAM sale but up low single digits organically. Adjusted EPS is expected to be approximately $1.15 to $1.25, with a planned tax rate of about 20%. Hallinan said pricing, tariff mitigation, and productivity initiatives are expected to drive roughly 300 basis points of year-over-year adjusted gross margin improvement in the quarter.

About Stanley Black & Decker NYSE: SWK

Stanley Black & Decker, Inc NYSE: SWK is a leading global manufacturer of industrial tools, engineered fastening systems, and security products. The company's portfolio includes power tools, hand tools, accessories, and storage solutions marketed under well-known brands such as DEWALT, Stanley, Craftsman and Black & Decker. In addition to its core tools and hardware offerings, the company provides customized assembly and installation systems for the automotive, electronics and aerospace industries.

Operations are organized across three principal business segments.

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