Stanley Black & Decker NYSE: SWK executives emphasized margin expansion, cash generation, and balance sheet improvement during the company’s fourth-quarter and full-year 2025 earnings call, while also outlining a 2026 outlook that factors in tariff-related headwinds early in the year and portfolio changes expected to reshape revenue and profitability.
Full-year 2025 results highlight margin gains and cash flow
CEO Chris Nelson said 2025 results reflected “disciplined execution” in a shifting macro and operating environment, pointing to targeted growth investments and “aggressive tariff mitigation actions.” For the full year, the company reported revenue of $15.1 billion, with total revenue down about 1% organically. Nelson highlighted revenue growth in DeWalt (up low single digits) and Aerospace Fasteners (up 25%).
Adjusted gross margin expanded 70 basis points to 30.7% for 2025, which management attributed to tariff mitigation actions and supply chain transformation efficiencies. Nelson and CFO Pat Hallinan also marked the completion of the company’s global cost reduction program, which delivered $2.1 billion of run-rate pre-tax cost savings since mid-2022.
Management said full-year adjusted EBITDA grew 5%, while adjusted EBITDA margin improved 70 basis points. Adjusted EPS increased 7% to $4.67. The company generated nearly $700 million of free cash flow in 2025, which Nelson said supported the dividend, debt reduction, and investments intended to strengthen brands and accelerate innovation.
Fourth-quarter performance: pricing and margins up, volume down
In the fourth quarter, Nelson said Stanley Black & Decker delivered “strong results across many of our key metrics,” citing gross margin expansion, robust free cash flow, and a strengthened balance sheet. However, revenue fell 1% overall and 3% organically, which management said was below expectations. The company reported a 4% price increase and a 2% currency tailwind, offset by a 7% volume decline.
Adjusted gross margin in the quarter was 33.3%, which Nelson said was toward the high end of the company’s planning range, driven by supply chain cost reductions, pricing plans, and tariff mitigation actions. Adjusted EBITDA margin increased 330 basis points year-over-year to 13.5%, and adjusted EPS was $1.41.
Free cash flow totaled more than $880 million in the quarter, which management attributed to working capital management alongside operational and supply chain optimization.
Segment details: Tools & Outdoor softness in retail; Engineered Fastening growth
Tools & Outdoor fourth-quarter revenue was about $3.2 billion, down 2% year-over-year, with organic revenue down 4%. Management said a 5% benefit from targeted pricing actions was more than offset by 9% volume pressure, while currency contributed a 2% benefit. Nelson said volume declines were “largely due to power tool demand dynamics in retail channels in North America” and a soft market backdrop in developed markets, noting consumers gravitated toward promotions in uncertain economic times.
The segment’s adjusted margin was 13.6%, up 340 basis points year-over-year, driven primarily by pricing, tariff mitigation, and supply chain cost reductions. By product line, the company said:
- Power Tools organic revenue declined 8%, partially offset by professional strength in commercial and industrial channels.
- Hand Tools, Accessories & Storage organic revenue was flat, with strong professional-grade accessory performance offset by softer hand tool results.
- Outdoor revenue increased 2% organically, supported by strong preseason ordering for 2026 and normalized inventory in the independent retail channel.
Nelson said DeWalt posted low single-digit organic growth for the full year, with organic growth across product lines and regions, supported by marketing activation and innovation. He cited the launch of the ATOMIC 20V MAX cordless grinder suite as an example of the company’s “platforming method” enabling rapid product launches.
Engineered Fastening fourth-quarter revenue rose 6% reported and 8% organically. Growth was driven by a 7% volume increase, 1% higher pricing, and a 1% currency tailwind, partially offset by a 3% headwind from a product line transfer into Tools & Outdoor (which management said would no longer be a factor after this quarter). The aerospace business delivered 35% organic growth in the quarter, while automotive posted mid-single-digit organic growth; general industrial fasteners declined low single digits. Adjusted segment margin was 12.1%.
Portfolio actions and capital allocation: divestiture proceeds aimed at debt reduction
Management discussed the definitive agreement announced on December 22 to sell the company’s Aerospace Fasteners business, describing it as consistent with focusing on larger brands and enhancing shareholder value. Separately, Hallinan said the company announced a definitive agreement to sell its “CAM business” for $1.8 billion in cash, expecting net proceeds after taxes and fees of approximately $1.525 billion to $1.6 billion.
Hallinan said proceeds are expected to be used to pay down debt, supporting incremental leverage reduction of 1 to 1.25 turns in 2026 and positioning the company to meet a leverage target at or below 2.5 times net debt to adjusted EBITDA. He added that following the CAM transaction, the company anticipates having additional options for capital deployment, while maintaining that organic growth investments remain the top priority and that the company has a preference for opportunistic share repurchases over time.
2026 outlook: tariff headwinds early, margin expansion targeted, brand investment rising
For 2026, the company guided to adjusted EPS of $4.90 to $5.70, which Hallinan said represents 13% growth at the midpoint. The planning assumption includes a half-year of CAM results, with the company working to close the transaction in the first half subject to regulatory approvals. Management expects CAM to contribute quarterly sales of about $110 million to $120 million and quarterly segment profit of about $10 million to $20 million in each of the first two quarters, including expected allocations.
Stanley Black & Decker expects free cash flow of $700 million to $900 million in 2026, and total revenue growth in the low single digits, with organic revenue also expected to rise at a similar rate. The company expects foreign exchange to provide a 50 to 100 basis point benefit, primarily in the first half.
Hallinan highlighted two notable revenue dynamics for 2026: the year-over-year impact of the CAM divestiture in the second half, and a planned transition of gas-powered walk-behind outdoor product lines to a licensing model starting around mid-year. The licensing shift is expected to reduce revenue by about $120 million to $140 million in 2026 and another $150 million to $170 million in 2027, with most of the impact in the second half of 2026 and first half of 2027, while improving margins and returns. Management said the change is already reflected in sales, margin, and EPS guidance.
The company expects adjusted gross margin to expand roughly 150 basis points year-over-year in 2026, supported by top-line expansion, price, tariff mitigation, and operational improvement, while noting that first-half margins will reflect headwinds from tariff expense and under-absorption from 2025. In Q&A, Hallinan provided quarterly gross margin expectations of roughly 30.5% in the first quarter, between that and 31% in the second quarter, and 34% to 35% in each of the third and fourth quarters, citing peak tariff expense and volume deleverage flowing through the first half.
For the first quarter of 2026, management expects net sales of around $3.7 billion (down roughly 1% year-over-year) and adjusted EPS of approximately $0.55 to $0.60, with the quarter reflecting the highest tariff expense on the P&L and a planned tax rate of about 30%.
On pricing, Hallinan said the company expects enterprise-wide pricing of about +2% for the full year, primarily in the first half, with modest changes to promotions and opening price points included within that view.
Management also said it expects to increase brand investment by $75 million to $100 million in 2026 versus 2025. Nelson said the company anticipates sales “inflections” in the Stanley and Craftsman brands in 2026, pointing to major product launches planned for Craftsman V20 and a refreshed Stanley lineup, as well as increased social spending and continued investment in European sales coverage for Stanley hand tools.
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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