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STANLEY BLACK & DECKER, INC. (SWK)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered resilient topline amid tariff and outdoor-season headwinds: revenue $3.95B (-2% YoY), adj. EPS $1.08, with gross margin at 27.0% (adj. 27.5%); pricing and cost actions offset part of tariff pressure .
  • Clear beats/misses versus Street: adj. EPS handily beat consensus ($1.08 vs $0.42*), while revenue modestly missed ($3.95B vs $3.99B*); EBITDA also above consensus on S&P Global normalization* [GetEstimates].
  • Management raised 2025 planning scenario: GAAP EPS to $3.45 ±$0.10 (prior $3.30 ±$0.15), adjusted to ~$4.65 (prior ~$4.50), and FCF target to ~$600M (prior ≥$500M); tariff net EPS impact now -$0.65 (better than -$0.75 prior) .
  • H2 setup: Q2 gross margin seen as the low; Q3/Q4 GM expected to expand YoY with a Q4 exit of ~33–34% and continued path to 35%+, albeit delayed 9–12 months by tariffs .
  • Dividend increased to $0.83 per share, underscoring cash generation focus and shareholder return commitment .

What Went Well and What Went Wrong

  • What Went Well

    • Professional demand held up; DEWALT posted continued topline expansion with pricing realization and resilient pro end-user demand .
    • Cost discipline and transformation: program reached ~$1.8B run-rate savings, with ~$150M incremental in Q2; efficiency gains cushioned tariff impact .
    • Forward margin trajectory: management guides Q3/Q4 GM expansion, Q4 exit ~33–34%, staying on 35%+ journey despite tariffs; quote: “We’re very committed to our 35% gross margin journey” — CFO .

  • What Went Wrong

    • Tariffs and seasonality: Outdoor slow season and tariff-related shipment disruptions drove organic revenue -3% and compressed margins (Tools & Outdoor adj. segment margin 8.0%, -240bps YoY) .
    • Gross margin down YoY: GM 27.0% (-140bps), adj. 27.5% (-170bps), with a ~3-point gross impact from tariffs; SG&A % also higher due to growth investments .
    • Automotive softness in Engineered Fastening reduced segment margins (adj. 10.8% vs 13.5% prior year) despite strong aerospace >20% organic growth .

Financial Results

MetricQ2 2024Q1 2025Q2 2025
Revenue ($USD Billions)$4.02 $3.74 $3.95
Diluted EPS – Continuing ($USD)($0.13) $0.60 $0.67
Adjusted EPS ($USD)$1.09 $0.75 $1.08
Gross Margin %28.4% 29.9% 27.0%
Adjusted Gross Margin %29.2% 30.4% 27.5%
EBITDA Margin %5.3% 8.9% 6.0%
Adjusted EBITDA Margin %10.7% 9.7% 8.1%
Cash from Operations ($USD Millions)$573.0 ($420.0) $214.3
Free Cash Flow ($USD Millions)$485.8 ($485.0) $134.7

Segment breakdown (Q2 2025):

SegmentSales ($USD Billions)Segment Profit ($USD Millions)Adjusted Segment Profit ($USD Millions)Segment Margin %Adjusted Segment Margin %
Tools & Outdoor$3.461 $238.1 $276.5 6.9% 8.0%
Engineered Fastening$0.484 $35.0 $52.3 7.2% 10.8%

Commercial/product KPIs (Q2 2025 and mix):

KPIQ2 2025
Company Organic Revenue Growth-3% (GAAP -2%, currency +1%)
Tools & Outdoor Organic-3% (Price +2%, Volume -5%, Currency +1%)
Engineered Fastening Organic-1% (Price +1%, Volume -2%, Transfer -3%, Currency +2%)
Tools & Outdoor Regional OrganicNA -4%, Europe -1%, RoW +1%
Product Lines (Tools & Outdoor)Power Tools +1%, Hand Tools -5%, Outdoor -7% (organic)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
GAAP EPSFY 2025$3.30 ± $0.15 $3.45 ± $0.10 Raised
Adjusted EPSFY 2025~$4.50 ~$4.65 Raised
Free Cash FlowFY 2025≥$500M ~$600M Raised
Tariff Gross Annualized ImpactFY 2025~$1.7B (scenario as of Apr.) ~$0.8B (updated Jul.) Lower expected run-rate
Tariff Net EPS ImpactFY 2025~-$0.75 ~-$0.65 Improved (less negative)
Q3 Adj. EPS phasingQ3 2025n/a~25% of FY adj. EPS New phasing detail
Dividend per ShareQ3 2025$0.82 $0.83 Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Gross margin trajectoryQ4 2024 adj. GM 31.2%; 35%+ multi-year target Q3/Q4 GM expansion; Q4 exit ~33–34%; 35%+ journey delayed 9–12 months by tariffs Positive inflection in H2 despite delay
Tariffs/macroApr. scenario: ~$1.7B gross annualized tariff; net -$0.75 EPS Updated run-rate ~$800M; net -$0.65 EPS; rare earth constraints considered Material but better than prior
Supply chain transformationRun-rate savings $1.5B (Q4 2024); $1.7B (Q1 2025) ~$1.8B to date; $150M incremental in Q2; $500M 2025 savings target Continued execution
Pricing actionsHigh single-digit U.S. price increase in April; second increase planned April price realized (~2% in T&O); more modest second increase early Q4; ~one-for-one price-volume elasticity Pricing in place; elasticity manageable
Product performanceDEWALT growth streak; Outdoor season load-ins DEWALT expansion; Outdoor -7% organic in Q2; demand improved in July Mixed; pro strong, DIY soft
Regional trendsNA +2% organic (Q1); Europe flat; RoW -3% T&O organic: NA -4%, Europe -1%, RoW +1% NA softness; select international resilience
Technology initiativesNone highlighted in Q4; early R&D notes DeWALT M‑Suite cloud BIM workflow and Hangers Automation tool launched Building digital jobsite solutions
USMCA/China sourcingUSMCA just below 1/3; reduce China supply over 12–24 months Plan to reduce China production for U.S. to <5% by end of 2026; raise USMCA compliance Active footprint shift

Management Commentary

  • CEO: “We delivered a solid second quarter amid the dynamic operating environment with the continued growth of our professional DEWALT brand… positioning the Company to embark on the next chapter of delivering sustainable growth and long term shareholder returns.”
  • CFO: “We would expect this fourth quarter of 2025 probably in that 33%–34% range… we’re very committed to our 35% gross margin journey… tariffs probably created a 9–12 month delay in getting to 35%.”
  • COO/Incoming CEO: “Our current plan is expected to reduce our Chinese production for the U.S. to less than 5% by the end of 2026… we intend to implement a second, more modest price increase early in the fourth quarter.”
  • CFO: “Top-line elasticity… an approximate one-for-one relationship between price and volume.”

Q&A Highlights

  • Gross margin phasing: Q3 +150–200bps YoY, Q4 >+200bps YoY; Q4 GM exit ~33–34%, driving path to 35%+ into 2026 .
  • Tariff math updated: ~$800M annualized gross cost; 2025 net P&L impact ~-$0.65 EPS after mitigation and pricing; rare earth timing adds near-term China tariff exposure .
  • Pricing acceptance: April increase fully in; demand patterns stable; second round early Q4 at ~half the first round, with one-for-one price-volume trade-off .
  • Inventory/channel: Inventories healthy and normalized; Q2 volatility tied to promotional plan changes rather than destocking .
  • Segment specifics: Outdoor season started late but improved; Craftsman tracking with DIY softness; aerospace in Engineered Fastening at ~$400M annualized run-rate with multi-year backlog .

Estimates Context

  • Versus Wall Street (S&P Global) for Q2 2025:
    • Adjusted/Primary EPS: $1.08 actual vs $0.42 consensus* → significant beat.
    • Revenue: $3.95B actual vs $3.99B consensus* → modest miss.
    • EBITDA (S&P normalized): $346M actual vs $314M consensus* → beat.
    • FY 2025 consensus: EPS ~$4.55*, revenue ~$15.23B*.
      Values retrieved from S&P Global.
MetricQ2 2024Q1 2025Q2 2025FY 2025
Primary EPS Consensus Mean ($)0.84*0.66*0.42*4.54*
Revenue Consensus Mean ($USD Billions)4.02*3.72*3.99*15.23*
EBITDA Consensus Mean ($USD Millions)413*360*314*1,643*

Key Takeaways for Investors

  • EPS beat driven by operational outperformance and discrete tax benefit; margin compression in Q2 appears transitory with H2 expansion guided (watch execution on pricing/mitigation) .
  • Tariff headwind outlook improved versus April; updated net EPS impact -$0.65 vs prior -$0.75 and gross run-rate ~$800M (better than $1.7B scenario); policy volatility remains a risk .
  • DEWALT remains a structural growth lever; Craftsman under DIY pressure but assortment expansion planned; aerospace strength anchors Engineered Fastening .
  • Supply chain transformation is delivering (run-rate ~$1.8B); footprint shifts (USMCA compliance, China <5% by 2026) are central to margin durability .
  • H2 catalysts: Q4 GM exit ~33–34% and potential narrative re-rating toward 35%+ GM trajectory; Q3 adj. EPS phasing (~25% of FY) provides near-term visibility .
  • Dividend raise to $0.83 signals confidence in FCF; FY FCF guide lifted to ~$600M supports deleveraging and potential portfolio pruning ($0.5–$1.0B proceeds) .
  • Near-term watch items: rare earth licensing/timing, elasticity impacts from Q4 price round, retailer promotional dynamics, and automotive demand in Engineered Fastening .