Key Highlights

  • Adjusted EPS of USD 2.31 compares with a USD 1.55 estimate, including about USD 0.67 from net Tariff refunds.
  • Net sales of USD 3.73 billion fell 1% but rose 4% organically, just under the USD 3.74 billion estimate.
  • Adjusted gross Margin reached 39.4%, up 780 basis points, with roughly 430 basis points from tariff refunds.
  • Free Cash Flow of USD 585 million supported USD 250 million of Buybacks and a new USD 1 billion authorization.

Stanley Black & Decker (NYSE:SWK) reported third quarter adjusted EPS of USD 2.31, well above the USD 1.55 estimate and USD 1.43 a year earlier. GAAP EPS was USD 1.83 versus USD 0.34. Both measures included a benefit of about USD 0.67 from net tariff refunds, after related incentive compensation costs, growth investments and taxes. Net sales were USD 3.73 billion, a shade below the USD 3.74 billion estimate and down from USD 3.756 billion a year ago.

Sales and Margin Detail

Organic sales rose 4%. Volume added 6%, pricing subtracted 2% and portfolio changes subtracted 4%, while currency was flat. Tools & Outdoor sales of USD 3.336 billion rose 2%, with organic growth of 4% led by power tools and strength in U.S. retail and commercial and industrial channels. North America grew 6% organically. The segment margin was 17.0%, up 520 basis points, and its adjusted margin was 17.6%.

Engineered Fastening sales fell 21% to USD 396 million because of the CAM divestiture, though Organic Sales rose 2% on broad industrial strength. Automotive results fell below the company's plan, and the adjusted segment margin slipped to 11.7%.

GAAP gross margin was 39.0%, up 760 basis points, and adjusted gross margin was 39.4%. Adjusted SG&A was 24.2% of sales, up 320 basis points, reflecting costs and investments tied to the refunds. Net Earnings were USD 272.1 million, or 7.3% of sales, against USD 51.4 million. Adjusted EBITDA margin was 16.3%, up 400 basis points. Chief executive Chris Nelson said Brand activation and innovation efforts are yielding results.

Cash Flow, Charges and Capital Returns

Operating cash flow was USD 658.5 million and free cash flow was USD 585.0 million, versus USD 155.3 million a year ago. Cash stood at USD 741.2 million, up from USD 280.1 million at the start of the year.

Pre-tax non-GAAP adjustments totaled USD 89.3 million, mainly restructuring charges of USD 29.5 million, an asset Impairment charge of USD 19.7 million and a USD 20.4 million loss on the sale of a small Engineered Fastening business.

The company repurchased about 2.5 million shares for roughly USD 250 million, fully using its USD 500 million authorization from April. On October 29 the board approved a new authorization of up to USD 1 billion, which runs to October 29, 2029.

Raised 2026 Guidance

Management raised GAAP EPS guidance to USD 5.45 to USD 5.85 from USD 4.60 to USD 5.45, and adjusted EPS guidance to USD 5.95 to USD 6.25 from USD 5.20 to USD 5.80. Free cash flow guidance rose to USD 1.0 billion to USD 1.2 billion from USD 600 million to USD 800 million. The adjusted EPS guide includes a net tariff refund impact of about USD 0.60 and does not include potential fourth quarter refunds.

For the fourth quarter, management guided net sales to about USD 3.6 billion, organic growth of 2% to 4%, adjusted gross margin of 34% to 35% and adjusted EPS of about USD 1.45.

Benchmarks Ahead

Nine month adjusted EPS of USD 4.66 plus the fourth quarter guide of about USD 1.45 totals about USD 6.11, close to the USD 6.10 midpoint of the full year range. Third quarter adjusted gross margin of 39.4% compares with the fourth quarter guide of 34% to 35%, and the USD 2.31 third quarter adjusted EPS compares with USD 1.45 for the fourth quarter. Free cash flow of USD 585 million for the quarter compares with USD 835.9 million for nine months.