On Thursday, Stanley Black & Decker (NYSE:SWK) received an upgrade in its stock rating from Mizuho (NYSE:MFG), moving from Neutral to Outperform. The firm also set a new price target for the company's shares at $110.00.
The upgrade was announced amidst a positive outlook on the company's potential performance. Mizuho's assessment is based on a blend of price-to-earnings (P/E) and EBITDA valuations, considering projections for 2026 and targets for 2027. The firm also accounted for a contingency hedge in its evaluation.
According to Mizuho, Stanley Black & Decker is currently trading at a significant discount compared to its peers. The company's shares are valued at over 20% less than those in the Building Products/Tools sector and 40% less than the Electrical Equipment/Multi-Industry (EE/MI) sector. This valuation places the company more than one standard deviation below the five-year average for its EBITDA multiple.
Additionally, the firm highlighted the added benefit of a 4% dividend yield for Stanley Black & Decker's investors. This detail contributes to the stock's attractiveness, as per the analyst's comments.
The upgrade to Outperform signals Mizuho's confidence in Stanley Black & Decker as one of the top picks in the EE/MI sector, citing an attractive and non-consensus risk/reward balance as the company heads into 2025.
In other recent news, Stanley Black & Decker reported a 5% decrease in Q3 2024 revenue, falling to $3.8 billion, with organic revenue also experiencing a 2% drop.
Despite this, the company highlighted significant improvements in its adjusted gross margin, which rose to 30.5%, and its EBITDA margin, which increased to 10.8%.
Notably, Stanley Black & Decker generated $200 million in free cash flow, a portion of which was used to pay down $100 million in debt. The company also revised its full-year adjusted EPS guidance to a range of $3.90 to $4.30.
In terms of brand performance, Stanley Black & Decker's DEWALT brand marked its sixth consecutive quarter of organic growth. Looking ahead, the company's management remains confident in achieving a $2 billion EBITDA target, potentially by early 2026, and is preparing for potential policy changes, including tariffs. However, the company expects market conditions to remain volatile until mid-2025, with potential improvement in the latter half of the year.
Interestingly, while the industrial segment experienced an 18% revenue decline, primarily due to an infrastructure divestiture, the Tools and Outdoor segment, bolstered by DEWALT, saw a smaller revenue decline and achieved organic growth. These are among the recent developments for Stanley Black & Decker.
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