By: Rob Wertheimer
This thesis has three legs, all pointing to market underestimation of long term prospects and value. 1) Stanley Black and Decker (SBD) has two to three points better organic growth than most industrials. That growth is driven by a comprehensive innovation platform and corporate strategy, and should be sustained. 2) The 2017 acquisition of the Craftsman brand, with sales rolling out in 2018, adds potential acceleration and support to that growth, with Stanley’s revenue framework for Craftsman likely to be exceeded due to Sears distress, a stronger channel in Lowe’s and Amazon, or both. Visible, but unmodeled, upside could be worth $10-20. 3) SWK shares trade at a wider discount to cash earnings than on GAAP; many industrials with similar amortization expense are valued on cash.