Stanley Black & Decker, Inc. SWK recently announced that it has entered into a deal with Securitas AB to divest the bulk of its security assets. The divestment deal, which is worth $3.2 billion in cash, incorporates Stanley Black's Commercial Electronic and Healthcare Security business lines. In 2021, the businesses are predicted to generate revenues of about $1.7 billion. It’s worth noting that the deal does not incorporate Stanley Access Technologies.

The deal, which is expected to be completed in the first half of 2022, is subject to certain regulatory procedures.

The company’s shares gained 3.3% yesterday to eventually close the trading session at $192.22.

Inside the headlines

The divestment is in sync with Stanley Black’s strategy of restructuring its business portfolio. This will likely enable the company to better focus on and efficiently direct resources to its core businesses, thus offering value to its shareholders.

As noted, Stanley Black intends to use the net proceeds from the sale of its security business to fund, in part, a share repurchase program of about $4 billion. Under the program, the company expects to repurchase shares worth $2-$2.5 billion in the first quarter of 2022, and the remaining is likely to be completed in the summer of the same year.

For 2021, the company reaffirmed its earnings outlook of $9.70-$10.05 on a GAAP basis and $10.70-$10.90 on an adjusted basis.

Also, this month, Stanley Black acquired two major providers of outdoor power equipment for $1.9 billion in aggregate. The acquisitions include an 80% stake in MTD Holdings Inc. and Excel Industries. The buyouts are expected to strengthen the company’s cordless electric outdoor power equipment offerings and complement its brands such as CRAFTSMAN, DEWALT and BLACK+DECKER.

Zacks Rank, Estimates and Price Performance

With a $31.3-billion market capitalization, the company currently carries a Zacks Rank #4 (Sell). The company is witnessing rising costs and expenses, which might affect its margins and profitability going forward. Also, increasing debt levels can raise its financial obligations and hurt profitability. However, its diversified business portfolio and synergistic gains from acquired assets are likely to be beneficial.

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In the past three months, its shares have gained 3.1% against the industry’s decline of 0.2%.

In the past 30 days, the Zacks Consensus Estimate for the company’s earnings declined 2.2% to $10.81 for 2021 on four downward estimate revisions against none upward. Over the same time frame, the consensus estimate for 2022 earnings inched down 1% to $11.81 on four downward estimate revisions against none upward.