Here's Why Shares in Stanley Black & Decker Soared This Week
An improving trading relationship between the U.S. and China is good news for Stanley Black & Decker.
Investors can pencil in better earnings and cash-flow outcomes than management gave recently, provided the tariffs don't go back up.
10 stocks we like better than Stanley Black & Decker ›
Stanley Black & Decker (NYSE: SWK) stock rose by 12.8% in the week to Friday morning. The move comes as a thawing in the U.S./China trading relationship encouraged investors to price in a better outcome for the toolmaker's earnings in 2025 and beyond.
The U.S. and China said they would suspend the incremental tariffs imposed on each other's goods, which were announced in early April for an initial period of 90 days. In addition, the parties will "establish a mechanism to continue discussions about economic and trade relations."
Due to its exposure to China-sourced products, the company is a bellwether for U.S./China trading relations. Its total adjusted cost of sales for the U.S. by country of origin is about $6.8 billion, with $0.9 billion to $1 billion directly from China, $1.5 billion to $1.6 billion from the rest of the world (also impacted by tariffs), and $1.2 billion to $1.3 billion from Mexico, two-thirds of which is non-USMCA compliant.
The cost exposure is sufficient for management to lower its full-year planning assumptions after the announcement of incremental tariffs (now paused for the U.S./China) in April:
The post-April guidance calls for base case adjusted full-year earnings per share (EPS) of $3.30 compared to the previous guidance of $4.05.
The post-April guidance calls for base case full-year free cash flow (FCF) of $500 million compared to the previous guidance of $750 million.
Given the pause in incremental tariffs and the possibility of a further de-escalation in the conflict, investors are now pencilling in figures for full-year EPS and FCF somewhere between the initial and post-April tariff guidance outlined above. That's why the stock rose this week.
Before you buy stock in Stanley Black & Decker, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Stanley Black & Decker wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
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Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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Every day, our over 100,000 team members deliver essential services that make spaces cleaner, safer, and efficient, enhancing the overall occupant experience. ABM serves a wide range of market sectors including commercial real estate, aviation, mission critical, and manufacturing and distribution. With over $8 billion in annual revenue and a blue-chip client base, ABM delivers innovative technologies and sustainable solutions that enhance facilities and empower clients to achieve their goals. Committed to creating smarter, more connected spaces, ABM is investing in the future to meet evolving challenges and build a healthier, thriving world. ABM: Driving possibility, together. For more information, visit Cautionary Statement under the Private Securities Litigation Reform Act of 1995 This press release contains both historical and forward-looking statements about ABM Industries Incorporated ('ABM') and its subsidiaries (collectively referred to as 'ABM,' 'we,' 'us,' 'our,' or the 'Company'). We make forward-looking statements related to future expectations, estimates and projections that are uncertain, and often contain words such as 'anticipate,' 'believe,' 'could,' 'estimate,' 'expect,' 'forecast,' 'intend,' 'likely,' 'may,' 'outlook,' 'plan,' 'predict,' 'should,' 'target,' or other similar words or phrases. These statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties, and assumptions that are difficult to predict. For us, particular uncertainties that could cause our actual results to be materially different from those expressed in our forward-looking statements include: our success depends on our ability to gain profitable business despite competitive market pressures; our results of operations can be adversely affected by labor shortages, turnover, and labor cost increases; we may not be able to attract and retain qualified personnel and senior management we need to support our business; investments in and changes to our businesses, operating structure, or personnel relating to our ELEVATE strategy, including the implementation of strategic transformations, enhanced business processes, and technology initiatives may not have the desired effects on our financial condition and results of operations; our ability to preserve long-term client relationships is essential to our continued success; our use of subcontractors or joint venture partners to perform work under customer contracts exposes us to liability and financial risk; our international business involves risks different from those we face in the United States that could negatively impact our results of operations and financial condition; decreases in commercial office space utilization due to hybrid work models and increases in office vacancy rates could adversely affect our financial condition; negative changes in general economic conditions, such as recessionary pressures, high interest rates, durable and non-durable goods pricing, changes in energy prices, or changes in consumer goods pricing, could reduce the demand for services and, as a result, reduce our revenue and earnings and adversely affect our financial condition; we may experience breaches of, or disruptions to, our information technology systems or those of our third-party providers or clients, or other compromises of our data that could adversely affect our business; our ongoing implementation of new enterprise resource planning ('ERP') and related boundary systems could adversely impact our ability to operate our business and report our financial results; acquisitions, divestitures, and other strategic transactions could fail to achieve financial or strategic objectives, disrupt our ongoing business, and adversely impact our results of operations; we manage our insurable risks through a combination of third-party purchased policies and self-insurance, and we retain a substantial portion of the risk associated with expected losses under these programs, which exposes us to volatility associated with those risks, including the possibility that changes in estimates to our ultimate insurance loss reserves could result in material charges against our earnings; our risk management and safety programs may not have the intended effect of reducing our liability for personal injury or property loss; unfavorable developments in our class and representative actions and other lawsuits alleging various claims could cause us to incur substantial liabilities; we are subject to extensive legal and regulatory requirements, which could limit our profitability by increasing the costs of legal and regulatory compliance; a significant number of our employees are covered by collective bargaining agreements that could expose us to potential liabilities in relation to our participation in multiemployer pension plans, requirements to make contributions to other benefit plans, and the potential for strikes, work slowdowns or similar activities, and union organizing drives; our business may be materially affected by changes to fiscal and tax policies; negative or unexpected tax consequences could adversely affect our results of operations; future increases in the level of our borrowings and interest rates could affect our results of operations; impairment of goodwill and long-lived assets could have a material adverse effect on our financial condition and results of operations; if we fail to maintain proper and effective internal control over financial reporting in the future, our ability to produce accurate and timely financial statements could be negatively impacted, which could harm our operating results and investor perceptions of our Company and as a result may have a material adverse effect on the value of our common stock; our business may be negatively impacted by adverse weather conditions; catastrophic events, disasters, pandemics, and terrorist attacks could disrupt our services; and actions of activist investors could disrupt our business. For additional information on these and other risks and uncertainties we face, see ABM's risk factors, as they may be amended from time to time, set forth in our filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K and subsequent filings. We urge readers to consider these risks and uncertainties in evaluating our forward-looking statements. Use of Non-GAAP Financial Information To supplement ABM's consolidated financial information, the Company has presented net income and net income per diluted share as adjusted for items impacting comparability for the second quarter and six months of fiscal years 2025 and 2024. These adjustments have been made with the intent of providing financial measures that give management and investors a better understanding of the underlying operational results and trends as well as ABM's operational performance. In addition, the Company has presented earnings before interest, taxes, depreciation and amortization, and excluding items impacting comparability (adjusted EBITDA) for the second quarter and six months of fiscal years 2025 and 2024. Adjusted EBITDA is among the indicators management uses as a basis for planning and forecasting future periods. Adjusted EBITDA margin is defined as adjusted EBITDA divided by revenue excluding management reimbursement. We cannot provide a reconciliation of forward-looking non-GAAP adjusted EBITDA margin measures to GAAP due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation. The Company has also presented Free Cash Flow which is defined as net cash provided by (used in) operating activities less additions to property, plant and equipment. The presentation of these non-GAAP financial measures is not meant to be considered in isolation or as a substitute for financial statements prepared in accordance with accounting principles generally accepted in the United States of America. (See accompanying financial tables for supplemental financial data and corresponding reconciliations to certain GAAP financial measures.) We round amounts to millions but calculate all percentages and per-share data from the underlying whole-dollar amounts. As a result, certain amounts may not foot, crossfoot, or recalculate based on reported numbers due to rounding. Unless otherwise noted, all references to years are to our fiscal year, which ends on October 31. *Not meaningful (due to variance greater than or equal to +/-100%) *Not meaningful (due to variance greater than or equal to +/-100%) (a) The Company adjusts income to exclude the impact of certain items that are unusual, non-recurring, or otherwise do not reflect management's views of the underlying operational results and trends of the Company. (b) After communications with the staff of the Securities and Exchange Commission, we have revised the definition of our non-GAAP financial measures—including adjusted net income, adjusted earnings per share, adjusted EBITDA, and adjusted EBITDA margin—to no longer exclude the positive or negative impact of 'prior year self-insurance adjustments'. Prior year self-insurance adjustments reflect the net changes to our self-insurance reserves for our general liability, workers' compensation, automobile, and health insurance programs, related to claims from incidents that occurred in previous years. This definitional change has been applied to our second quarter 2025 results and retroactively to all presented periods to ensure comparability. Of note, the definitional change had no impact in second quarter 2025 results. (c) Represents acquisition and integration related costs associated with recent acquisitions. (d) Represents discrete transformational costs that primarily consist of general and administrative costs for developing technological needs and alternatives, project management, testing, training and data conversion, consulting and professional fees for i) new enterprise resource planning system, ii) client facing technology, iii) workforce management tools and iv) data analytics. These costs are not expected to recur beyond the deployment of these initiatives. (e) Three and six months ended April 30, 2025 include a parking tax audit settlement related to prior years. (f) The Company's tax impact is calculated using the federal and state statutory rate of 28.11% for FY2025 and FY2024. We calculate tax from the underlying whole-dollar amounts, as a result, certain amounts may not recalculate based on reported numbers due to rounding. (g) Six months ended April 30 2025 and 2024 include a $0.1 million and a $0.3 million benefit for uncertain tax positions with expiring statues, respectively.
