Stanley Black & Decker (NYSE: SWK) have announced their third quarter 2018 financial results. In a statement to investors, Stanley Black & Decker’s President and CEO, James M. Loree, commented, “The Company delivered 4% organic growth, 14.5% operating margin and 6% adjusted EPS growth in the quarter while coping with $135 million of pre-tax external headwinds (3.9% of sales) from input cost inflation, currency and tariffs. During the quarter, the 2018 impact of these external pressures increased by $50 million, causing us to trim our 2018 EPS outlook by $0.25 at the mid-point, still up 9% year-over-year. We are taking cost actions totaling $250 million as well as additional pricing actions to preserve our ability to produce 2019 earnings growth. The cost actions will be substantially complete by year-end 2018 and the majority of the pricing actions will be implemented in early first quarter 2019.
“We have an outstanding array of revenue growth catalysts in place for 2019 and beyond to support continued strong financial performance and we will not allow the financial benefit from them to be eroded by external factors outside of our control. The catalysts include (1) the accelerating Craftsman program rollout which we now expect to deliver $1 billion in incremental revenue significantly faster than prior expectations, (2) a new exclusive brand partnership with a major home center (announced in a separate release), (3) our growing e-commerce share gains, (4) a robust emerging market growth program, (5) growing revenue synergies from the Lenox/Irwin acquisition and (6) continued revenue benefits from FlexVolt and new innovations. In addition, the recently announced IES transaction should provide an additional $300 – $400 million source of 2019 inorganic growth.
These are the growth patterns:
Tools & Storage
Net sales increased 3% versus 3Q’17 due to volume (+5%), and price (+1%) partially offset by currency (-3%). The impact of pricing expanded 50 basis points sequentially reflecting the incremental benefit from our 3Q pricing actions. Each region contributed to the strong organic growth for the quarter with emerging markets +10%, North America +6% and Europe +3%. Emerging markets growth was due to continued benefits from executing our mid-price-point product and e-commerce strategies as well as the impact from pricing actions. North America organic growth was driven by continued benefits from new product innovation, the rollout of the Craftsman brand and price realization, partially offset by the unfavorable volume impact of brand transitions at a major home center. Europe growth was supported by new products and successful commercial actions overcoming market pressure and customer transitions in the UK. Overall Tools & Storage segment profit rate was 16.6%, excluding charges, down from the 3Q’17 rate of 17.3%, as the benefits from volume leverage, pricing and cost control were more than offset by the impacts from currency, commodity inflation and tariffs.
Net sales increased 10% versus 3Q’17 due to acquisitions (+11%) partially offset by currency (-1%). Engineered Fastening organic revenues were up 1% as industrial & automotive fastener penetration gains were partially offset by the expected impact from lower automotive system volumes. Infrastructure organic revenues were down 6% due to anticipated lower pipeline project activity in Oil & Gas partially offset by growth within Hydraulic Tools. Overall Industrial segment profit rate was 16.8%, excluding charges, down from the 3Q’17 rate of 18.0%, as productivity gains and cost control were more than offset by commodity inflation and the modestly dilutive impact from the acquisition of Nelson Fasteners.
Net sales increased 1% versus 3Q’17 as bolt-on commercial electronic security acquisitions (+3%) and price (+1%) were partially offset by currency (-2%) and lower volume (-1%). North America organic growth declined 1% as higher volumes within automatic doors were offset by lower installations in commercial electronic security. Europe was flat organically as strength within the Nordics was offset by weakness in France and the UK. Overall Security segment profit rate, excluding charges, improved 110 basis points sequentially to 11.1%, which was down 20 basis points versus the prior year rate, reflecting investments to support the business transformation in commercial electronic security partially offset by a focus on cost containment.