Executive Summary

Q3 2025 delivered flat revenue at $3.76B (−0.0% YoY) and strong margin recovery: GAAP gross margin 31.4% (+150 bps YoY) and adjusted gross margin 31.6% (+110 bps YoY), with adjusted EBITDA margin 12.3% (+150 bps YoY) .
Versus S&P Global consensus, SWK posted a clear beat on adjusted EPS ($1.43 vs $1.19*) and essentially in-line adjusted EBITDA (~$469.8M vs ~$468.9M*), with revenue a slight miss ($3.756B vs $3.768B*) (pricing +5% offset by volume −6%) . Values retrieved from S&P Global.
2025 outlook changed: GAAP EPS cut to $2.55–$2.70 (from ~$3.45 ±$0.10), adjusted EPS trimmed to ~$4.55 (from ~$4.65); free cash flow target unchanged at ~$600M; Q4 adjusted EPS targeted at ~$1.29 and Q4 adjusted gross margin ~33% ±50 bps .
Strategic levers gaining traction: pricing actions (second round in Q4), tariff mitigation via rapid supply chain shifts (US COGS from China targeted to <10% by mid-2026 and <5% by end-2026), and cost program nearing $2.0B run-rate savings by year-end 2025—key margin catalysts into 2026 .

What Went Well and What Went Wrong

What Went Well

Margin rebound and resilient profitability: adjusted gross margin rose to 31.6% (+110 bps YoY) and adjusted EBITDA margin to 12.3% (+150 bps YoY), driven by disciplined pricing and supply chain transformation benefits .
Tools & Outdoor margin expanded YoY with continued DEWALT growth; T&O adjusted margin improved to 12.0% (+90 bps YoY), and DEWALT “maintained strong momentum,” with revenue expansion across product lines/regions .
Clear mitigation path on tariffs and supply chain localization: “rapidly moving cordless production from China to Mexico,” targeting <10% of US COGS from China by mid-2026 and <5% by end-2026 . Quote: “We expect to continue our trajectory of year-over-year adjusted gross margin improvement…” .

What Went Wrong

Top-line softness and negative volume: net sales flat as price (+5%) and FX (+1%) were offset by volume (−6%); Tools & Outdoor organic −2% amid tariff-related promotional reductions and a soft consumer backdrop .
GAAP EPS compression and non-cash impairments: GAAP EPS fell to $0.34; company recorded $169.1M of non-cash asset impairment, primarily trade name write-downs (Lenox, Troy-Bilt, Irwin) and minority investment write-downs tied to legacy ventures .
Engineered Fastening YoY margin still below prior year on tougher comps and elevated production costs (11.9% vs 14.4% GAAP), though improved sequentially (adj margin +200 bps vs Q2) .

Financial Results

Consolidated P&L Snapshot (oldest → newest)

Metric	Q3 2024	Q2 2025	Q3 2025
Revenue ($USD Billions)	$3.751	$3.945	$3.756
GAAP Diluted EPS ($)	$0.60	$0.67	$0.34
Adjusted EPS ($)	$1.22	$1.08	$1.43
Gross Margin % (GAAP)	29.9%	27.0%	31.4%
Gross Margin % (Adjusted)	30.5%	27.5%	31.6%
SG&A % of Sales (GAAP)	21.2%	22.1%	21.1%
SG&A % of Sales (Adjusted)	20.8%	20.8%	21.0%
Adjusted EBITDA Margin %	10.8%	8.1%	12.3%

Q3 2025 vs S&P Global Consensus

Metric	Consensus	Actual	Surprise
Revenue ($USD Billions)	$3.768*	$3.756	Miss (−$0.012B, ~−0.3%)*
Adjusted EPS ($)	$1.19*	$1.43	Beat (+$0.24, ~+20%)*
Adjusted EBITDA ($USD Millions)	$468.9*	$469.8	In line (~+$1M)*

Values retrieved from S&P Global.

Segment Performance (oldest → newest)

Segment	Q3 2024 Sales ($M)	Q2 2025 Sales ($M)	Q3 2025 Sales ($M)	Segment Margin Q3’24	Segment Margin Q2’25	Segment Margin Q3’25	Adj Segment Margin Q3’24	Adj Segment Margin Q2’25	Adj Segment Margin Q3’25
Tools & Outdoor	3,263.3	3,461.4	3,255.5	10.0%	6.9%	11.8%	11.1%	8.0%	12.0%
Engineered Fastening	488.0	483.8	500.5	14.4%	7.2%	11.9%	13.9%	10.8%	12.8%

Notes: EF sequential recovery (Q3 vs Q2) with adj margin +200 bps and margin +470 bps cited in release .

Cash Flow and Balance Sheet KPIs (oldest → newest)

KPI	Q3 2024	Q2 2025	Q3 2025
Cash From Ops ($M)	$285.8	$214.3	$221.2
Free Cash Flow ($M)	$199.3	$134.7	$155.3
Dividend/Share ($)	$0.82	$0.82	$0.83
Cash & Equivalents ($M)	$300.9	$311.8	$268.3
Short-term Borrowings ($M)	—	1,069.8	1,355.0
Long-term Debt ($M)	5,602.6 (Dec-24)	4,757.8	4,702.8
Inventories, net ($M)	4,536.4 (Dec-24)	4,639.0	4,442.6
Adjusted Tax Rate (Qtr)	—	—	14.0%

Other relevant PRs in the quarter: Board declared a regular Q4 cash dividend of $0.83 per share (payable Dec 16; record date Dec 1) .

Guidance Changes

Metric	Period	Previous Guidance (Q2 2025)	Current Guidance (Q3 2025)	Change
GAAP EPS	FY 2025	~$3.45 (±$0.10)	$2.55–$2.70	Lowered
Adjusted EPS	FY 2025	~ $4.65	~ $4.55	Lowered
Free Cash Flow	FY 2025	~ $600M	~ $600M	Maintained
Adjusted Gross Margin	FY 2025	Not quantified (LT target 35%+)	Approaching ~31%	Updated level
Adjusted Gross Margin	Q4 2025	N/A	~33% ±50 bps	New
Adjusted EPS	Q4 2025	N/A	~ $1.29	New
SG&A % of Sales	FY/Q4 2025	Manage down vs volume	~21% “and a fraction” (FY and Q4)	Clarified
Tax Rate (Adjusted)	FY 2025	Not specified	~15%	New
Tools & Outdoor Org Rev	FY 2025	Not specified	~ −1%	New
Engineered Fastening Org Rev	FY 2025	Not specified	Low single-digit growth	New
Dividend	Q4 2025	Regular dividend cadence	$0.83 declared	Maintained

Management also reiterated LT adjusted gross margin target 35%+ and cost savings program target of ~$2.0B run-rate by year-end 2025 .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2 2025)	Current Period (Q3 2025)	Trend
Tariffs & Mitigation	Q1: April high-single-digit US T&O price hike; second hike planned for early Q3; accelerating supply chain shifts; 2025 net EPS tariff impact ~−$0.75 . Q2: “Expect incremental tariff countermeasures” in 2H; gross margin dip on tariffs .	Pricing +5% with second hike in Q4; tariff-related promo reductions; mitigation through supply shifts; GM back on expansion path .	Improving mitigation; GM re-accelerating
Supply Chain/USMCA	Q1: Leverage NA footprint; shift to Mexico . Q2: Transformation “on track” to 2025 completion .	Rapid shift of cordless to Mexico; US COGS from China targeted <10% mid-’26, <5% end-’26 .	Acceleration of localization
Pricing Discipline	Q1: Initial pricing in April; more to come . Q2: Further pricing to offset tariffs .	Second price increase in Q4; low-single-digit sized, across two of three months .	Continuing
Gross Margin Trajectory	Q1: Adjusted GM 30.4% (+140 bps YoY) . Q2: Adjusted GM 27.5% (tariff hit) .	Adjusted GM 31.6% (+110 bps YoY); Q4 guide ~33% ±50 bps; 2026 Q4 goal ~35% .	Back on track
Brand/DEWALT Momentum	Q1: DEWALT growth streak . Q2: DEWALT growth despite softness elsewhere .	DEWALT growth across lines/regions; +600 trade specialists support .	Sustained
End-Market Demand	Q1: Outdoor pre-season strength . Q2: Outdoor season slow; consumer soft .	Consumer DIY soft; promos normalized in Q4; NA POS flat (dollar basis) for Q3 .	Mixed
Auto/Aero (EF)	Q1: Auto soft, aero strength . Q2: EF margins pressured by mix .	Aero >25% organic; auto improved; EF adj margin +200 bps seq .	Positive sequentially
Working Capital	Q1: Inventory elevated amid transitions . Q2: CFO emphasis .	Target >$500M seasonal drawdown Q4; 2026 inventory opportunity ~$1B; 2026 WC reduction target ~$200–$300M .	Incremental
Capital Allocation/Leverage	—	Aim ≤2.5x net debt/adj EBITDA; asset sale targeted within 12 months .	Deleveraging path

Management Commentary

CEO on margin and strategy: “We expect to continue our trajectory of year-over-year adjusted gross margin improvement… with expansion projected on a full-year basis for 2025 and 2026.”
CFO on 2026 margin target: “We are working game plans for 2026 that have us around 35% in the fourth quarter… generate $350–$400M of gross productivity next year.”
Supply chain localization: “We have been rapidly moving cordless production from China to Mexico… reduce from ~15% of U.S. supply from China in 2024 to <10% by mid-2026 and <5% by end of 2026.”
Brand momentum: “DEWALT… maintained strong momentum and continued to demonstrate top-line growth… revenue expansion across all product lines and regions.”
Q4 setup: “We expect continued year-over-year expansion of adjusted gross margin to around 33% ±50 bps” and “Adjusted EPS for the fourth quarter is expected to be approximately $1.29.”

Q&A Highlights

Price vs. volume cadence and Q4 drivers: Management expects Q4 operating profit expansion from both gross margin (benefit from the second price increase and supply chain efficiencies) and SG&A reduction; gross margin targeted ~33% ±50 bps .
Tariff relief sensitivity: 10-pt tariff reduction has only a small near-term impact (low single-digit millions in Q4; ~$5–$10M per quarter in early 2026), not a long-term game-changer given strategic goal to minimize China exposure .
Tools & Outdoor pricing vs expectations: Global pricing manifests mid-single digit due to mix (US T&O high-single-digit on ~60% of business); Q4 cadence similar to Q3 with promotional normalization .
USMCA progress: On track to reach compliance levels “around industrials average” over the medium term; second round of pricing effective across ~two months of Q4 .
Working capital and inventory: Plan >$500M Q4 working-capital reduction; 2026 inventory opportunity approaches ~$1B at current revenue level (targeting ~$200–$300M reduction in 2026) .

Estimates Context

Q3 2025 print versus S&P Global consensus: Adjusted EPS beat ($1.43 vs $1.19*), revenue slight miss ($3.756B vs $3.768B*), and adjusted EBITDA in line (~$469.8M vs ~$468.9M*) . Values retrieved from S&P Global.
Q2 2025 for trend: Adjusted EPS also beat prior quarter’s consensus ($1.08 vs $0.42*), revenue modest miss ($3.945B vs $3.994B*), adjusted EBITDA beat (~$345.6M vs ~$313.6M*) . Values retrieved from S&P Global.
Implication: Street likely lifts EPS trajectory near-term (pricing + mix + efficiency), while trimming/holding revenue given consumer softness and tariff-related promo impacts; focus shifts to Q4 GM delivery (~33%) and 2026 35% GM path .

Key Takeaways for Investors

Margin recovery is the near-term stock driver: Q4 adjusted GM guide ~33% and FY 2025 approaching ~31% underpin EPS resilience despite flat to slightly down revenue .
Pricing power and mix offset volume headwinds: Two rounds of 2025 price increases and DEWALT pro strength are cushioning consumer softness; execution on promos in Q4 is critical .
Tariff mitigation de-risking 2026: Aggressive supply chain shifts (Mexico ramp, USMCA path) reduce tariff exposure structurally and support the 35% adjusted GM goal (Q4’26 target) .
Cost program nearing completion: ~$1.9B run-rate achieved of $2.0B target; operating system/“platforming” should provide ongoing productivity tailwinds into 2026 .
Watch EF sequential improvement: Aero >25% organic growth and auto stabilization boosted EF margins sequentially; sustainability here supports consolidated mix and margins .
Balance sheet focus intact: Free cash flow target ~$600M maintained; leverage target ≤2.5x aided by a potential asset sale within 12 months .
2025 EPS guide cut (GAAP/adjusted): Non-cash impairments and higher production costs trimmed outlook, but Q4 setup and 2026 path suggest estimate revisions will concentrate on margins rather than top-line acceleration .

Note: All non-estimate figures and quotes are sourced to company filings/press release/transcript as cited. S&P Global consensus values are marked with an asterisk (*) and provided under “Values retrieved from S&P Global.”

STANLEY BLACK & DECKER, INC. (SWK)·Q3 2025 Earnings Summary