A Stanley Black & Decker grass trimmer
David Paul Morris/BloombergBloomberg
Stanley Black & Decker is losing market share to its rivals, Citi analysts said as they double downgraded their rating on the tools maker to Sell from Buy.
The analysts also cited the lack of innovative products and margin pressures at the New Britain, Conn.-based company, and dropped their price target on the stock to $145 from $215.
Stanley Black & Decker (ticker: SWK) declined 3.3% to $161 on Monday. The stock set a 52-week low of $160.49 earlier in the session.
Hong-Kong based competitor Techtronic (ticker: 0669.H.K.) said last week that it remains on track with its “internal” performance targets for the first half of 2022. “This positive statement is in stark contrast to [Stanley Black & Decker’s] recent weakness in volume growth, along with layoffs,” said Citi analyst Eric Lau in a research note Monday.
Volume at Stanley Black & Decker fell 8% in the fourth quarter year over year. The company confirmed it has made some layoffs, according to several reports, including from the Hartford Business Journal.
“We believe [Techtronic’s] upcoming 2H21E results (due on 2nd Mar) would provide more evidence of the potential market loss of SWK to leading players like TTI or even Chervon (2285.H.K),” said Lau. Chervon also is expected to report results for the fiscal year ended December on March 2.
Stanley Black & Decker, Techtronic and Chervon all have faced similar headwinds. But Lau estimated Techtronic and Chervon will post year-over-year revenue growth of 20% and15%, respectively, for the second half of 2021. This is against Stanley Black & Decker’s 8.2% year-over-year drop in tools and storage revenue over the same horizon, Lau said.
Bottom line, “We think weak 4Q21 was more due to market share loss than macro headwinds,” he said. The company reported fourth-quarter adjusted earnings last week of $2.14 a share, significantly below the year earlier.
In addition, Lau sees the recent acquisitions of MTD and Excel, two outdoor power equipment companies, to be margin dilutive for Stanley Black & Decker.
Analysts tracked by FactSet rate the stock at Overweight with an average price target of $223. Citi analysts rate both Techtronic and Chervon at Buy.
Stanley Black & Decker is expected to report first-quarter earnings on April 22.
Write to Karishma Vanjani at [email protected]
