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Why Stanley Black & Decker's Shares Dropped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Stanley Black & Decker (NYSE: SWK  ) fell as much as 16% today after the company announced earnings and full-year guidance.

So what: For the third quarter, revenue jumped 10% to $2.76 billion and adjusted earnings rose from $0.69 per share a year ago to $1.39. Analysts anticipated $2.81 billion in revenue and $1.38 per share in earnings, so results were basically in line with expectations.  

What sent shares screeching lower today was 2013 earnings guidance of $4.90 to $5.00 per share from a previous estimate of $5.40 to $5.65. The results were blamed on a slow pace of improvement in the security division along with lost sales during the government shutdown.

Now what: While the market clearly viewed this as a terrible earnings report, I think some perspective is needed. The government shutdown's impact on sales will be temporary, so that shouldn't be a major concern. On the security division side, management said margin goals are taking longer than anticipated but isn't backing off them long-term.

The dip today provides a nice buying opportunity for investors willing to look past short-term challenges for long-term gains. Margins will pick up and the company has paid a dividend for 137 straight years, which I don't think comes into question with bad guidance in one quarter.

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Related Tickers

9/28/2016 3:11 PM
SWK $123.08 Up +0.83 +0.68%
Stanley Black and… CAPS Rating: *****