Stanley Black & Decker beats earnings, margins surge 240bps
Industrial manufacturer delivers $883M in free cash flow, targets 13% EPS growth in 2026
Stanley Black & Decker reported better-than-expected fourth-quarter earnings on Wednesday, with the industrial manufacturer delivering a significant margin expansion that investors hope signals a turnaround for the tools and security company.
The company reported adjusted earnings per share of $1.41 for the fourth quarter of 2025, beating analyst consensus estimates of $1.28, according to the company's earnings release. Gross margin expanded by 240 basis points year-over-year to 33.2%, while adjusted gross margin reached 33.3%, up 210 basis points.
The margin improvement helped Stanley Black & Decker generate $883 million in free cash flow for the quarter, a key metric for industrial companies as they seek to reduce debt and invest in growth. For the full year 2025, free cash flow totaled $688 million, contributing to approximately $240 million in debt reduction.
Revenue for the quarter came in at $3.7 billion, missing the consensus estimate of $3.78 billion, according to MarketBeat data. The top line declined 1% compared to the prior year and was down 3% on an organic basis, reflecting ongoing challenges in demand across several end markets.
Despite the revenue shortfall, investors focused on the company's improving profitability and strategic actions. Stanley Black & Decker shares traded between $78.94 and $82.92 on Wednesday, according to Robinhood trading data, before settling at $79.30, down 2.17% for the day.
The company's board approved a significant strategic move in December, announcing the sale of its Consolidated Aerospace Manufacturing (CAM) business to Howmet Aerospace for $1.8 billion in cash. Stanley Black & Decker acquired the aerospace fastener manufacturer in 2020 for approximately $1.5 billion. The transaction is expected to close in the first half of 2026, with proceeds earmarked for debt reduction.
"We delivered solid results across our key focus areas in 2025, with continued gross margin and net income growth, strong free cash flow, a strengthened balance sheet, and strategic investments focused on driving sustainable, profitable growth," said Chris Nelson, President and Chief Executive Officer of Stanley Black & Decker.
Looking ahead, the company provided guidance for 2026 that calls for adjusted earnings per share in the range of $4.90 to $5.70, representing 13% growth at the midpoint of $5.30. GAAP earnings per share are expected to range from $3.15 to $4.35. The guidance incorporates results from the CAM business for the first half of the year and accounts for the current tariff landscape.
Stanley Black & Decker also targeted free cash flow of $700 million to $900 million for 2026, an increase of 16% at the midpoint. The company noted that approximately $1.35 to $1.75 in charges related to footprint optimization and other cost actions would separate GAAP from adjusted earnings in 2026.
The earnings beat comes as Stanley Black & Decker works through a multiyear turnaround effort after facing elevated costs, supply chain disruptions, and softening demand in key markets like professional construction and consumer retail. The company's stock has traded in a 52-week range between $51.99 and $87.04, reflecting investor uncertainty about the pace of recovery.
Analysts maintain a cautiously optimistic view on the shares. The consensus price target stands at $87.51, according to market data, representing roughly 8% upside from current levels. The analyst rating breakdown shows 6 buy recommendations, 12 hold ratings, and 1 sell rating, with 1 strong buy and 1 strong sell among the 20 analysts covering the stock.
The company's turnaround strategy has focused on operational efficiency, cost reduction, and portfolio optimization. The sale of the CAM business represents a key element of this strategy, allowing management to focus resources on core tools and security franchises where Stanley Black & Decker holds leading market positions.
While 2026 guidance incorporates some uncertainty, including tariff impacts and mixed demand signals, the company's ability to expand margins while generating substantial free cash flow suggests progress toward restoring profitability levels that investors have come to expect from the industrial conglomerate.