SWK - Embedded Expectations Analysis - 2019 12 17
Stanley Black & Decker, Inc. (SWK:USA) currently trades near corporate averages relative to UAFRS-based (Uniform) Earnings, with a 21.3x Uniform P/E. At these levels, the market is expecting profitability to improve, but management may be concerned about their growth, EPS, and market share.Specifically, management may lack confidence in their ability to sustain double-digit growth in the Craftsman brand and in their ability to realize $200mn in savings from their cost reduction measures. Furthermore, they may be concerned about the sustainability of recent volume growth within health care, automatic doors, and electronic security, and they appear concerned about ongoing margin headwinds through the remainder of 2019. Finally, they may lack confidence in their ability to sustain market share growth in South America and Southeast Asia and in their ability to improve their EPS.
Stanley Black & Decker is a provider of hand tools, power tools and related accessories, engineered fastening systems and products, services and equipment for oil and gas and infrastructure applications, commercial electronic security and monitoring systems, healthcare solutions, and automatic doors. The company's segments include: Tools and Storage, which is comprised of the power tools and equipment and hand tools, accessories and storage businesses; Industrial, which is comprised of the engineered fastening and infrastructure businesses; and Security, which is comprised of the convergent security solutions and the mechanical access solutions businesses.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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