Stanley Black & Decker, Inc. (SWK Quick QuoteSWK - Free Report) reported fourth-quarter 2023 adjusted earnings of 92 cents per share, which beat the Zacks Consensus Estimate of 73 cents. The company reported a loss of 10 cents per share in the year-ago quarter.

Stanley Black’s net sales of $3.7 billion missed the consensus estimate of $3.9 billion. The top line also declined 6.3% year over year due to weakness in the Tools & Outdoor segment.

Segmental Discussion

Revenues from SWK’s primary segment, Tools & Outdoor, totaled $3.2 billion, down approximately 7% year over year. Lower consumer outdoor and DIY market demand weighed on segmental revenues. Our estimate for segmental revenues was $3.3 billion.

The Tools & Outdoor unit manufactures and markets power tools for professional, consumer tools, hand tools, storage systems, pneumatic tools and fasteners. The segment has been grappling with lower volumes due to reduced retail and consumer demand. In 2023, the segment’s revenues declined 7.3% year over year.

Revenues from the Industrial segment grossed $582.3 million, down 4% year over year. Lower volumes in the infrastructure market hurt segmental revenues. Our estimate for segmental revenues was $588.8 million.

Margin Profile

In the reported quarter, Stanley Black’s cost of sales decreased 18.6% year over year to $2.6 billion. The gross profit increased 46.6% to $1.1 billion. The gross margin increased 1070 basis points (bps) to 29.6%.

Selling, general and administrative expenses increased 10.1% year over year to $834.0 million. Adjusted EBITDA was $350.3 million, reflecting year-over-year growth of more than 100%. The margin increased 620 bps to 9.4%.

Balance Sheet and Cash Flow

While exiting the fourth quarter, Stanley Black had cash and cash equivalents of $449.4 million compared with $395.6 million reported at the end of fourth-quarter 2022. The long-term debt balance was $6.1 billion, higher than $5.4 billion reported at the end of fourth-quarter 2022.

In 2023, net cash provided by operating activities was $1.2 billion against $1.5 billion cash used in the year-ago period. Capital and software expenditures totaled $338.7 million, down from $530.4 million reported in the year-ago period. Free cash inflow (before dividends) in the year was $852.6 million against $2.0 billion free cash outflow a year ago.

In 2023, SWK paid out dividends worth $482.6 million to its shareholders, up 3.6% from the year-ago period.

2024 Guidance

For 2024, Stanley Black expects adjusted earnings of $3.50-$4.50 per share. The mid-point of the guided range — $4 — lies below the Zacks Consensus Estimate of $4.38. The company anticipates earnings of $1.60-$2.85 per share in the year

Stanley Black expects a free cash flow of $0.6-$0.8 billion for 2024.

Zacks Rank & Stocks to Consider

SWK currently carries Zacks Rank #3 (Hold). Some better-ranked companies from the Industrial Products sector are discussed below:

Flowserve Corporation (FLS Quick QuoteFLS - Free Report) presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

FLS delivered a trailing four-quarter average earnings surprise of 27.3%. In the past 60 days, the Zacks Consensus Estimate for Flowserve’s 2023 earnings has remained steady. The stock has risen 14.9% in the past year.

A. O. Smith Corporation (AOS Quick QuoteAOS - Free Report) presently carries a Zacks Rank of 2. It has a trailing four-quarter average earnings surprise of 14%.

The Zacks Consensus Estimate for AOS’ 2023 earnings increased 0.8% in the past 60 days. Shares of A. O. Smith have jumped 20.6% in the past year.

Crane Company (CR Quick QuoteCR - Free Report) currently carries a Zacks Rank of 2. The company delivered a trailing four-quarter average earnings surprise of 29.8%.

In the past 60 days, the Zacks Consensus Estimate for Crane’s 2023 earnings has increased 0.2%. The stock has risen 43.8% in the past year.