Stanley Black & Decker, Inc. Q4 FY2025 earnings call

• In 2025, total revenues were $15.1 billion, down about 1% organically. Adjusted gross margin expanded 70 basis points to 30.7%, and adjusted EBITDA grew by 5%. Adjusted earnings per share grew 7% to $4.67.
• Fourth quarter results: Revenue down 1%, 3% organically; adjusted gross margin 33.3%, adjusted EBITDA margin 13.5% (up 330 basis points year over year), adjusted earnings per share $1.41, free cash flow over $880 million.
• Global cost reduction program achieved $2.1 billion of run rate pretax cost savings since mid-2022 and continues to pursue annual productivity savings near 3% net spend.
• On December 22, announced the definitive agreement to sell the aerospace fasteners business, with net proceeds to significantly reduce debt.

Tools and Outdoor: Fourth quarter revenue was approximately $3.2 billion, down 2% year over year. Organic revenue was down 4%, with a 5% benefit from targeted pricing actions offset by 9% volume pressure. Currency contributed a 2% benefit. Adjusted segment margin was 13.6%, up 340 basis points year over year. Full year organic revenue declined 2%. Engineered fastening: Fourth quarter revenue grew 6% on a reported basis and 8% organically, with a 7% volume increase, 1% higher pricing, and 1% currency tailwind partially offset by a 3% headwind from a product line transfer. Adjusted segment margin was 12.1% in the quarter. Full year organic revenue growth was 3%.

• 2026 adjusted EPS expected in the range of $4.90 to $5.70 (13% midpoint growth), including a half-year contribution from CAM.
• Free cash flow targeted at $700 million to $900 million.
• Total company revenue expected to grow in the low single digits year over year, with organic revenue also expected to grow similarly.
• Adjusted gross margin expected to expand by approximately 150 basis points.
• Tools and Outdoor expected to deliver low single-digit organic growth; Engineered fastening planned to grow mid-single digits organically.

• Macroeconomic and geopolitical uncertainties.
• Tariff headwinds impacting the industry.
• Consumer promotional sensitivity and market softness affecting volume, especially in opening price point products.

Q: Dial in on the cadence of gross and operating margin performance for the year, specifically about first quarter being flat and year-over-year improvement...

A: Patrick Hallinan explained about first quarter margin around 30.5%, second quarter between 30.5-31%, back half 34-35% due to peak tariff expense and volume deleverage rolling off, but actions underway to mitigate.

Q: Touch on tariff mitigation measures, price elasticity, and USMCA...

A: Christopher Nelson discussed operational mitigation plans to be out of China for US consumption less than 5% by end of 2026, progress on USMCA, and mentioned consumer sensitivity in opening price point products and promotional areas.

Q: Talk about volume visibility, share gains, and tweaks to promotional cadences...

A: Christopher Nelson said volume improvement expected with strong professional market and new product launches, and tweaks to promotional plans are in response to consumer and competitive actions.

Q: Discuss elasticity of volume vs price increases, and what could improve it...

A: Patrick Hallinan noted heightened sensitivity in opening price points earlier, but expected to get back to one-to-one elasticity with manageable adjustments to promotions and price points.

Q: Comment on margin trajectory beyond 2026, inflation, and productivity...

A: Patrick Hallinan stated pursuing ~3% annual gross savings, managing SG&A relative to volumes, and pricing driven by innovation and brand building.