Stanley Black & Decker Q3 Earnings Call Highlights

Key Points

• Tariff refunds boosted results and raised forecasts: Stanley Black & Decker reported Q3 adjusted earnings of $2.31 per share, with $0.67 per share from net tariff refunds. It raised 2026 adjusted earnings guidance to $5.95–$6.25 per share and free cash flow guidance to $1.0–$1.2 billion.
• Operating performance was mixed: Organic revenue grew 4%, led by 10% growth in power tools, while outdoor revenue declined 12%. Engineered Fastening organic revenue rose 2%, but automotive weakness weighed on margins and led the company to expect flat segment margins for 2026.
• Inflation could prompt price increases: Management expects meaningful 2027 inflation, particularly in steel and electrical components, and is preparing pricing actions likely around year-end. The board also authorized a new $1 billion share repurchase program.

Stanley Black & Decker NYSE: SWK raised its 2026 earnings and free cash flow forecasts after tariff refunds helped lift third-quarter results, while executives said they are preparing price increases to address inflation in 2027.

The toolmaker reported third-quarter adjusted earnings of $2.31 per share, exceeding the midpoint of its previous guidance by $0.76. Net tariff refunds, after related costs and investments, contributed $0.67 per share. Lower interest expense and share repurchases also aided results, Chief Financial Officer Patrick Hallinan said.

Organic revenue grew 4% in the quarter, and adjusted gross margin reached 39.4%. Approximately 430 basis points of that margin came from the net tariff benefit, with productivity gains and favorable product mix driving much of the remaining year-over-year improvement, Hallinan said.

“Even excluding the net benefit of tariff refunds, adjusted gross margin performance for the third quarter was strong and at the high end of our second half guidance range,” Chief Executive Officer Chris Nelson said.

Refunds Lift Full-Year Outlook

The company raised and narrowed its 2026 adjusted earnings forecast to $5.95 to $6.25 per share. The midpoint is $0.60 above its prior forecast, with $0.55 of the increase attributable to incremental net tariff refunds received in the third quarter. The remaining $0.05 reflects a lower share count and other items, including reduced net interest expense.

The full-year forecast includes a $0.60-per-share net benefit from tariff refunds received in the second and third quarters, after related costs and taxes. It does not assume additional fourth-quarter refunds because their timing and amounts remain uncertain, Hallinan said. The company has received most of the refunds for which the government has provided a pathway, he added.

Stanley Black & Decker also raised its free cash flow forecast by $400 million at the midpoint, to a range of $1 billion to $1.2 billion. Its revenue outlook was unchanged: total revenue is expected to be approximately flat, with low-single-digit organic growth.

For the fourth quarter, management expects about $3.6 billion in net sales, organic growth of 2% to 4% and adjusted earnings of approximately $1.45 per share. That earnings estimate includes roughly $0.25 per share of incremental costs and taxes tied to refunds already received.

Power Tools and Industrial Demand Support Growth

Tools & Outdoor revenue rose 2% to approximately $3.3 billion in the third quarter. Organic revenue grew 4%, as 7% volume growth was partly offset by a three-percentage-point drag from pricing. Power tools organic revenue increased 10%, while outdoor organic revenue fell 12%, which Nelson attributed in part to weather pressures in the U.S., Australia and New Zealand.

U.S. retail revenue increased by a mid-single-digit percentage, while revenue in the U.S. commercial and industrial channel rose by a mid-teens percentage. Nelson said investments in field resources and demand from professional users supported the commercial and industrial performance.

Adjusted segment margin for Tools & Outdoor rose to 17.6% from a year earlier, an increase of 560 basis points. Net tariff refunds contributed approximately 430 basis points of the improvement.

Engineered Fastening revenue fell 21%, primarily because of the aerospace fasteners divestiture completed earlier in the year. Organic revenue rose 2%, as 10% growth in industrial more than offset a 2% decline in automotive. The segment’s adjusted margin declined 110 basis points to 11.7%, largely because of automotive demand pressure.

The company now expects low-single-digit organic growth for Engineered Fastening in 2026, citing recent deterioration in the automotive market. It expects the segment’s adjusted margin to be flat for the year.

Pricing and Investment Plans

Hallinan said inflationary pressures have increased, particularly for steel and electrical components, and that the company expects meaningful inflation in 2027 whether or not tariff rates rise. Management plans to use productivity measures and pricing actions to address those costs, with a price increase likely around the turn of the year.

Nelson said the company maintained its planned third-quarter promotional approach and would work with channel partners on future pricing. Hallinan said the inflation pressures are industry-wide and that the company could be among the earlier businesses to raise prices.

Tariff refunds have also allowed Stanley Black & Decker to bring forward growth investments. Hallinan estimated investments associated with the refunds, excluding tax and compensation effects, at $70 million to $80 million for the full year. He said the spending was broadly in line with what the company would otherwise have planned for 2027.

Share Repurchases and Portfolio Changes

The company repurchased more than 2.5 million shares for about $250 million during the third quarter, completing a $500 million authorization approved in April. After the quarter ended, the board approved a new $1 billion repurchase authorization.

Stanley Black & Decker also expects to close its previously announced sale of Excel, the Hustler-branded large-format mower business, around year-end. Nelson said the company is near the end of its major portfolio transformation and has no further actions currently on the docket, though smaller pruning opportunities remain possible.

About Stanley Black & Decker (NYSE:SWK)

Stanley Black & Decker is a global manufacturer of tools, outdoor equipment and engineered fastening products. Its portfolio includes power and hand tools, tool storage, accessories, and outdoor power equipment sold under brands such as DEWALT, CRAFTSMAN, STANLEY and BLACK+DECKER.

The company also supplies engineered fastening solutions and related products to customers in industries such as construction, automotive and manufacturing. Its products serve professional users, businesses and consumers in markets around the world.

Stanley Black & Decker traces its roots to Stanley Works, founded in 1843, and the Black & Decker company, founded in 1910.

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