Will Stanley Black & Decker (SWK) Miss on Q3 Earnings?

Industrial tool maker, Stanley Black & Decker, Inc. (SWK), is scheduled to report third-quarter results on Oct 22 before the market opens. The Zacks Consensus Estimate for the quarter is pegged at $1.44.

Stanley Black & Decker reported better-than-expected results in the last trailing four quarters, with an average earnings surprise of +4.24%. In the second quarter, the company’s earnings of $1.43 per share surpassed the Zacks Consensus Estimate of $1.37 by 4.4%. Let us see whether Stanley Black & Decker can keep the earnings streak alive in the third quarter.

Factors to Affect Q3 Results

Industrial activities, measured in terms of industrial production in the U.S., increased a meager 3.2% year over year in third quarter as against 5.5% in the preceding quarter. Also, the job market provided little reason to rejoice as dismal performance in August dragged down new job additions in third quarter by 15.5% over the preceding quarter.

Further, with the Fed all set to discontinue its bond purchases, investor sentiments are shaky, while damper global growth is likely to hurt the country’s export businesses. Nevertheless, stabilization will be conducive to industrial activities, acting as growth boosters for machinery companies like Stanley Black & Decker.

However, Stanley Black & Decker anticipates organic growth to be affected by lower growth expectations from emerging markets and weak outdoor products business in North America. Security business is likely to remain weak. In addition, risks associated with negative foreign currency translations and stiff competition in all businesses might hinder growth.

Earnings Whispers?

Our proven model conclusively shows that Stanley Black & Decker is likely to miss earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: Expected Surprise Prediction or ESP is currently -1.39%. This is because the Most Accurate estimate of $1.42 stands below the Zacks Consensus Estimate of $1.44.

Zacks Rank: Stanley Black & Decker carries a Zacks Rank #4 (Sell).

We caution against stocks with Zacks Ranks #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revision momentum.

Other Stocks to Consider

Here are some companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Nordson Corporation (NDSN), with an Earnings ESP of +0.88% and a Zacks Rank #2 (Buy).

Caterpillar Inc. (CAT), with an Earnings ESP of +2.26% and a Zacks Rank #3 (Hold).

Gorman-Rupp Co. (GRC), with an Earnings ESP of +5.26% and a Zacks Rank #3.
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