Tool and hardware stocks offer investors a way to play two attractive long-term themes in the U.S. economy -- the desirability of owning and maintaining your own home or car. Anyone who does either is almost certainly going to contribute to the bottom line of the four companies featured here.
Our list
Publicly traded tool and hardware companies
| Company | Ticker | Market Capitalization | Activity |
|---|---|---|---|
| Home Depot | (NYSE:HD) | $401.3 billion | Home improvement retailer. |
| Snap-on | (NYSE:SNA) | $18.1 billion | Tools, equipment, and diagnostics for professional users. |
| Lowe's Companies | (NYSE:LOW) | $145 billion | Home improvement retailer. |
| Stanley Black & Decker | (NYSE:SWK) | $12.9 billion | Tools and storage, commercial security products, and engineered fasteners. |
1. Home Depot
1. Home Depot
The company is a behemoth in home improvement, but that doesn't mean it can’t gain market share. Management estimates its share of a large and fragmented U.S. market is only 15%, but structural changes are working in its favor.
An increase in e-commerce use in the hardware sector favors Home Depot. It has the supply chain ability and store density to offer an omnichannel strategy, including in-store pickup and digital ordering when viewing products in the store. Half of the company's U.S. online orders are picked up in a store, so, assuming this trend continues, outlets with more stores will be winners.
In addition, Home Depot's $18.25 billion acquisition of SRS Distribution, a residential specialty trade distribution company, that was completed in June 2024 will strengthen its position in the professional market and allow it to expand in areas where the professional customer tends to dominate, such as in roofing.
2. Snap-on
2. Snap-on
The company sells tools, equipment, and diagnostics aimed at the vehicle repair market. About 39% of sales come from its commercial and industrial segment, which services a broad range of industrial customers. The repair systems and information segment, which sells to independent repair shops and original equipment dealerships, is responsible for 33%. The Snap-on tools group segment -- selling to vehicle service and repair technicians -- is responsible for 28%.
Snap-on is a play on growth in the vehicle repair market. It's primarily a function of the number of miles driven in the economy. A growing economy generally means more miles driven, and more miles driven means more maintenance, more repairs, and an increased need for tools to fix vehicles.
Snap-on benefits from two other trends. First, the average age of the U.S. vehicle continues to rise. The average car was 7 years old in 1980; it’s now almost 12. Second, the increasing complexity of vehicles creates an opportunity for Snap-on to sell more sophisticated, value-added equipment to vehicle repair technicians. It all adds up to a positive long-term environment for the company.
3. Lowe's Companies
3. Lowe's Companies
Many of the arguments discussed above for Home Depot also apply to Lowe's. In addition, Lowe's has an opportunity to play catch-up with Home Depot across a range of key metrics.
Back in 2010, the two companies had pretty similar metrics in terms of operating profit margin, return on invested capital, and free cash flow from assets.
Since then, however, Home Depot has pulled away from its main rival on almost every conceivable metric -- a fact that’s well-understood by Lowe’s CEO Marvin Ellison, who headed up Home Depot’s U.S. store operations from 2002 to 2014, and took over as Lowe's CEO in 2018.
Given the operating margin differential between the two companies, if Lowe's raises its margin to merely match Home Depot's margin (roughly 15%), it would end up boosting operating profit by 25% without even increasing revenue.
That's one of Ellison's aims, and as of early 2025, the gap had closed considerably. If interest rates are heading lower over the next few years, then Lowe's and Home Depot have the potential to do well.
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4. Stanley Black & Decker
4. Stanley Black & Decker
The company has struggled in recent years as relatively high interest rates negatively impacted the housing market and do-it-yourself (DIY) spending. The correction in the DIY was compounded by a natural retraction from the boom years created by the lockdown measures imposed during the COVID-19 pandemic.
As such, Stanley Black & Decker continues to try to reduce excess inventory while holding pricing and waiting for a pickup in demand, possibly in a lower interest rate environment. Meanwhile, management has a restructuring program in place set to significantly lower costs while it waits for more favorable trading conditions.
