Options Trade – Stanley Black & Decker, Inc. (NYSE:SWK) Calls 
Tuesday, January 21, 2014

Power Your Way To a Profit!

**OPTIONS TRADE: Buy the SWK Apr 2014 85.000 call (SWK140419C00085000) at or under $2.05, good for the day. Place a protective stop limit at $0.80 and a pre-determined sell at $3.50.

by Ian Harvey

January 21, 2014


Stanley Black & Decker, Inc. (NYSE: SWK) will report its fourth quarter results on January 24th. It reports before the market opens, with analysts expecting earnings of $1.29 per share. When it last reported earnings back in October, the company failed to hit expectations for its quarterly earnings, posting third quarter earnings of $1.37 per share, missing by a penny. The stock took a big hit on the miss, dropping slightly over 14% following the news, but has since started to rebound. Even with the big post-earnings hit, the stock has still managed to gain 8.1% from its end of June price.

For fiscal 2013, it expects EPS of $5.40 up to $5.65 and $11 billion in revenue. According to estimates, analysts on an average are expecting the Company to report revenues of $11 billion and EPS of $5.44 for fiscal 2013.

Company Details

Stanley Black & Decker Inc. is a diversified global provider of power and hand tools, mechanical access solutions (automatic doors, commercial and residential locking systems), electronic security and monitoring systems and products and services for various industrial applications.

The Company’s operations are classified into three business segments: Construction & Do-It-Yourself (CDIY), Security, and Industrial.

In September 2011, Stanley Black & Decker acquired Niscayah Group AB.

In September 2011, the Company acquired Microtec Enterprises, Inc. In January 2011, the Company acquired InfoLogix, Inc.

In December 2012, Spectrum Brands Holdings Inc acquired Hardware & Home Improvement Group (HHI) of the Company.

In February 2013, the Company completed its acquisition of Infastech.

Key Statistics for SWK

Current P/E Ratio (ttm) 13.7591
Estimated P/E(12/2013) 16.4146
Relative P/E vs. SPX 0.7976
Earnings Per Share (USD) (ttm) 5.8994
Est. EPS (USD) (12/2013) 4.9450
Est. PEG Ratio 1.7462
Market Cap (M USD) 14,359.20
Shares Outstanding (M) 176.90
30 Day Average Volume 1,467,937
Price/Book (mrq) 2.0700
Price/Sale (ttm) 1.1791
Dividend Indicated Gross Yield 2.47%
Cash Dividend (USD) 0.5000
Dividend Ex-Date 12/04/2013
5 Year Dividend Growth 9.46%
Next Earnings Announcement 01/24/2014

Technical Outlook

Shares of Stanley Black & Decker closed Friday trading at $81.17, down 1.48%. Stanley Black & Decker has a 52 week low of $73.77 and a 52 week high of $92.76. The stock’s 50-day moving average is $72.51 and its 200-day moving average is $69.87.

Technical indicators for SWK are bullish and the stock is in a strong upward trend. The stock has support above $24.20 and resistance below $28.25.


Stanley Black & Decker last released its earnings data on Wednesday, October 16th. The company reported $1.39 earnings per share for the quarter, meeting the analysts’ consensus estimate of $1.39. The company had revenue of $2.80 million for the quarter, compared to the consensus estimate of $2.81 million.

During the same quarter last year, the company posted $1.40 earnings per share. Stanley Black & Decker’s revenue was up 9.6% compared to the same quarter last year. Analysts expect that Stanley Black & Decker will post $4.95 EPS for the current fiscal year.

Analysts Opinions

KeyCorp upgraded shares of Stanley Black & Decker from a hold rating to a buy rating in a research note released last Tuesday morning.

A KeyBanc analyst said that the stock's price has room to grow and that the company's financial results have the potential to beat Wall Street predictions.

Kenneth Zener, who also set a $96 price target for the stock, noted that the tool maker's stock fell about 11 percent during the fourth quarter, while shares of industrial companies overall rose 10 percent.

The drop came after Stanley cut its full-year profit forecast in October. Zener said that when that happened, confidence in the stock's ability to grow and thrive dropped for many investors.

"While time will be necessary for Stanley Black & Decker to regain both lost confidence and investors, we think it will occur in 2014, as sales growth and operating leverage (about 30 percent) are at normalized rates," Zener wrote in a note to investors.

Also on Tuesday, Janney Capital Markets analyst Liam Burke backed his "Buy" rating for the stock, saying that investors haven't fully taken into account the boost the company could get from its industrial business.

Also, Stanley Black & Decker has been the subject of a number of other recent research reports:-

• Analysts at Zacks upgraded shares of Stanley Black & Decker from an underperform rating to a neutral rating in a research note to investors on Thursday, December 19th. They now have a $85.00 price target on the stock.

• Separately, analysts at UBS AG cut their price target on shares of Stanley Black & Decker from $95.00 to $89.00 in a research note to investors on Wednesday, December 11th. They now have a buy rating on the stock.

• Finally, analysts at Credit Suisse initiated coverage on shares of Stanley Black & Decker in a research note to investors on Monday, December 9th. They set a neutral rating and a $71.00 price target on the stock.

One analyst has rated the stock with a sell rating, nine have assigned a hold rating and six have given a buy rating to the stock. The stock currently has a consensus rating of Hold and an average price target of $85.00.

Analyst Firms Making Recommendations



It is believed that the selloff following the third quarter results was a bit extreme, which is evident in the fact that it was rebounded 8.2% from the selloff. Wall Street hates to see any sort of earnings miss, but it was not the miss that really brought out the bears. What spooked analysts was the company's forward guidance. It slashed its full year guidance from a range of $5.40 to $5.65 a share down to a range of $4.90 to $5.00.

The good news for investors at the current time, is that the full-year guidance numbers have now been priced into the stock, so as long as the company is able to hit that revised estimate, the stock should continue to rebound. The encouraging news is that SWK recently issued its 2014 full-year guidance, with a range of $5.30 to $5.50 per share, in-line with what analysts expect.

Historically, Black and Decker has been a strong stock and was trading just shy of its all-time high prior to its last quarterly report. Wall Street likes the stock, and as long as there is no huge earnings miss, we should see its shares trading higher. With the company recently issuing its full year guidance, there should not be any surprises along these lines this time around.

Therefore, based on the facts above the following options trade is recommended…..

**OPTIONS TRADE: Buy the SWK Apr 2014 85.000 call (SWK140419C00085000) at or under $2.05, good for the day. Place a protective stop limit at $0.80 and a pre-determined sell at $3.50.

”Success is simple. Do what's right, the right way, at the right time.”

Option Tip for your Success!
Options traders are not successful because they win.
Options traders win because they are successful.

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