SWK Sinks as Inflation Pressures Mount

The power tools manufacturer also posted a second-quarter earnings beat

Deputy Editor
Jul 27, 2021 at 10:09 AM
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The shares of power tool manufacturer Stanley Black & Decker, Inc. (NYSE:SWK) are down 3.4% to trade at $198.71 following the company's second-quarter earnings report. The firm posted adjusted second-quarter earnings of of $3.08 per share on $4.30 billion in revenue, both of which topped analysts' expectations.

The company also lifted its full-year guidance, noting that all of its segments saw double-digit year-over-year growth. So why the lackluster price action amid such an encouraging report? Broad-market headwinds could be weighing on SWK, as well as the announcement that the company was raising its prices to combat commodity inflation.

The beat-and-raise sparked a bull note from Baird, which lifted its price target to $236 from $232. That's noteworthy considering analysts were optimistic on SWK headed into today; it's 12-month consensus price target of $242.23 is a 17.6% premium to current levels, and of the 11 in coverage, eight say "buy" or better. 

Despite limited absolute volume, options traders haven't been so optimistic. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), 2.18 puts have been picked up for every call during the last two weeks. This ratio stands higher than 83% of readings from the past 12 months, suggesting a healthier-than-usual appetite for long puts of late. 

Since hitting a record high of $225 in mid-May, SWK has been chopping lower, though its 160-day moving average appears ready to contain the pullback, as the trendline did back in February. The security is up over 25% in the past 12 months, and still boasts a 11% year-to-date lead.

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