October 17, 2012 / 10:52 AM / 7 years ago

UPDATE 3-Stanley Black & Decker bets on emerging markets

* Third-quarter adjusted profit/share $1.40 vs est $1.45

* Cuts 2012 adjusted earnings/share outlook to about $5.25

* Shares fall as much as 6 percent

By Bijoy Anandoth Koyitty

Oct 17 (Reuters) - Stanley Black & Decker Inc, known for its Black & Decker and Dewalt power tools and Stanley security products, is sharpening its focus on emerging markets as economic woes in Europe forced it to cut its full-year earnings outlook.

The company said the goal is to have emerging markets contribute 20 percent of its total revenue by 2015, and increase it to 30 percent by the end of the decade.

Emerging markets, which include Asia and Latin America, accounted for about 14 percent of the company’s total revenue in the third quarter.

Shares of Stanley Black & Decker fell as much as 6 percent to a two-month low of $68.09 on Wednesday after the company cut its full-year adjusted earnings outlook as lower margins hurt its third quarter.

On a conference call with analysts, the company said it would invest $20 million developing its brand in emerging markets. This will be part of a $100 million investment it is planning to revive revenue growth, starting in the fourth quarter.

Stanley Black & Decker in July acquired Singapore-based Infastech, a maker of engineered mechanical fasteners, for $850 million in cash to expand its footprint in emerging markets.

New Britain, Connecticut-based Stanley Black & Decker, with a market value of about $12 billion, said it would also change its product sourcing strategy to boost its presence in emerging markets.

The company said it would have local experts manufacture most of its products with mid-price points, replacing more expensive Western-designed products.

The United States accounted for about 53 percent of the company’s third-quarter revenue, while Europe contributed 24 percent.

SHRINKING MARGINS

Stanley Black & Decker reported earnings, excluding items, of $1.40 per share for the third quarter, lagging analysts’ average forecast of a profit of $1.45 per share, according to Thomson Reuters I/B/E/S.

“The earnings miss was largely due to the European industrial and security segments where business continues to be a challenge,” Longbow Research analyst David Macgregor said.

The company said it now expects full-year adjusted earnings of about $5.25 per share, down from its previous forecast of between $5.40 and $5.65 per share.

Stanley Black & Decker said third-quarter margins fell to 36.2 percent from 37 percent, mainly due to lower volumes in its high-margin industrial and security divisions.

Revenue rose 6 percent to $2.79 billion, but fell short of analysts’ estimates of $2.83 billion.

The company’s shares, which have gained 22 percent of their value in the last three months, were down 5 percent at $68.97 in afternoon trading on the New York Stock Exchange.

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