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Introduction & Market Context
Stanley Black & Decker (NYSE:SWK) presented its first quarter 2025 results on April 30, revealing a company navigating challenging tariff headwinds while maintaining organic growth. The tool manufacturer reported revenue of $3.7 billion, down 3% year-over-year, though organic growth reached 1% when excluding the impact of currency (-2%) and divestitures (-2%).
The company’s shares responded positively to the results, with premarket trading showing a 2.51% increase to $62.80 following the presentation, suggesting investors were encouraged by the company’s ability to grow organically despite external pressures.
Quarterly Performance Highlights
Stanley Black & Decker delivered adjusted earnings per share of $0.75 for the quarter, with GAAP EPS at $0.60. The company highlighted its adjusted gross margin of 30.4%, representing a 140 basis point improvement driven by supply chain enhancements and innovation, though partially offset by freight inflation and tariffs.
As shown in the following summary of key first quarter metrics:
The company’s performance varied significantly by segment. The Tools & Outdoor division, which represents the majority of Stanley’s business, maintained flat year-over-year revenue at $3.28 billion while improving its adjusted segment margin to 9.6% from 8.5% in the prior year. North American sales grew by 2%, while European sales remained flat and Rest of World declined by 3%.
In contrast, the Engineered Fastening segment faced more significant challenges, with revenue declining 21% year-over-year to $464 million and adjusted segment margin falling to 10.1% from 12.1%. This decline was primarily attributed to divestitures (-16%), with organic revenue decreasing by only 1%.
The following segment breakdown illustrates these contrasting performances:
Tariff Impact & Mitigation Strategy
A central focus of Stanley Black & Decker’s presentation was its comprehensive strategy to address the impact of U.S. tariffs, particularly those affecting Chinese imports. The company estimates that tariffs will have an approximate $0.75 negative impact on EPS in 2025, even after mitigation efforts.
Stanley’s supply chain is geographically diverse, with approximately $6.8 billion in total U.S. supply based on country of origin. This includes $2.9-3.0 billion from the U.S., $1.2-1.3 billion from Mexico, $0.9-1.0 billion from China, and $1.5-1.6 billion from the rest of the world.
The company’s mitigation strategy includes implementing price increases and adjusting its supply chain. A high single-digit price increase was implemented in April, with a second increase planned for the third quarter of 2025.
The following visualization illustrates Stanley’s tariff navigation strategy and supply chain breakdown:
Strategic Initiatives
Despite the tariff challenges, Stanley Black & Decker continues to make progress on its transformation journey, which aims to enhance operational efficiency and drive long-term margin improvements. The company reported pre-tax run-rate cost savings of $130 million quarter-to-date and $1.7 billion program-to-date.
The transformation efforts are focused on three strategic priorities: accelerating growth culture to better serve end users and customers, generating cash and strengthening the balance sheet, and supporting the long-term margin journey.
As illustrated in the company’s strategic focus areas:
Innovation remains a key component of Stanley’s growth strategy, with the presentation highlighting new products such as DEWALT TOUGHWIRE and expanding global reach with DEWALT Jobsite Containers in Saudi Arabia. These initiatives are part of the company’s efforts to accelerate organic growth while completing its transformation program in 2025.
Forward-Looking Statements
Looking ahead to the remainder of 2025, Stanley Black & Decker has adjusted its outlook to account for tariff impacts. The company now forecasts GAAP earnings per share of $3.30 (+/- $0.15) and adjusted EPS of approximately $4.50, down from a pre-tariff midpoint of $5.25 in February.
Revenue is expected to grow at a low single-digit rate year-over-year, with organic revenue projected to increase at a low-to-mid single-digit rate. Free cash flow is targeted to meet or exceed $500 million for the year.
The following planning assumptions outline Stanley’s revised 2025 forecast:
This adjusted outlook reflects the company’s pragmatic approach to navigating the current economic environment while continuing to execute on its strategic priorities. Management emphasized that the transformation journey remains on track, with a focus on becoming a more focused company, delivering strong execution, building a growth culture, and providing compelling shareholder value.
Detailed Financial Analysis
Stanley Black & Decker’s first quarter free cash flow was negative at $(485) million, showing a slight improvement from $(497) million in the same period last year. The company maintained a solid liquidity position with $0.3 billion in cash on hand and $2.7 billion in additional liquidity sources.
The reconciliation between GAAP and non-GAAP measures reveals $31.5 million in adjustments related to the company’s supply chain transformation, including footprint rationalization, material productivity, operational excellence, and facility-related costs.
Despite the negative free cash flow in the first quarter, which is typical for the company’s seasonal pattern, Stanley remains confident in achieving its full-year free cash flow target of at least $500 million, which would represent a significant improvement over recent performance and support the company’s debt reduction efforts.
Compared to the previous quarter (Q3 2024), where Stanley reported a 5% revenue decline with a 2% drop in organic revenue, the Q1 2025 results show some improvement with only a 3% revenue decline and 1% organic growth, suggesting the company’s strategic initiatives may be gaining traction despite the challenging environment.
Full presentation:
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