Fourth Quarter And Full Year 2025 Overview February 4, 2026 Participants Cautionary Statement Chris Nelson President & Chief Executive Officer Patrick Hallinan EVP, Chief Financial Officer & Chief Administrative Officer Michael Wherley Vice President, Investor Relations 2 4Q and FY 2025 Earnings Call This Presentation and related discussions contain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934 ...

Financial Performance - Net sales for Q4 2025 were $3,684.6 million, a decrease of 1.0% from $3,720.5 million in Q4 2024[2] - Net earnings from continuing operations for Q4 2025 were $158.2 million, down from $194.9 million in Q4 2024, resulting in diluted earnings per share of $1.04[2] - Year-to-date 2025, net earnings from continuing operations reached $401.9 million, with diluted earnings per share of $2.65, up from $286.3 million and $1.89 in year-to-date 2024[10] - In Q4 2025, the company reported a gross profit of $5.9 million, compared to $16.1 million in Q4 2024, reflecting a significant decline[18] Profitability Metrics - Gross profit margin improved to 33.2% in Q4 2025 from 30.8% in Q4 2024, reflecting better cost management[2] - In Q4 2025, the gross profit was $1,221.9 million, representing 33.2% of net sales, compared to $1,144.1 million and 30.8% in Q4 2024[9] - The Tools & Outdoor segment reported a profit of $418.3 million in Q4 2025, with a segment profit margin of 13.2%, compared to $298.1 million and 9.2% in Q4 2024[11] - The Engineered Fastening segment reported a profit of $63.2 million in Q4 2025, maintaining a margin of 12.1%, consistent with Q4 2024[11] Cash Flow and Liquidity - Free cash flow for Q4 2025 was $882.9 million, compared to $564.6 million in Q4 2024, indicating improved liquidity[6] - Selling, general and administrative expenses for Q4 2025 were $801.8 million, or 21.8% of net sales, down from $855.2 million and 23.0% in Q4 2024[9] Segment Performance - Tools & Outdoor segment net sales were $3,160.4 million in Q4 2025, down from $3,227.6 million in Q4 2024, while segment profit increased to $418.3 million[8] - Engineered Fastening segment net sales increased to $524.2 million in Q4 2025 from $492.9 million in Q4 2024, with segment profit rising to $63.2 million[8] - Year-to-date 2025, the Tools & Outdoor segment profit was $1,328.8 million, with a margin of 10.1%, compared to $1,197.4 million and 9.0% in year-to-date 2024[13] - The Engineered Fastening segment showed a positive growth of 6% in Q4 2025, contrasting with declines in other segments[19] Asset and Debt Management - Total assets decreased to $21,243.7 million as of January 3, 2026, from $21,848.9 million as of December 28, 2024[4] - Long-term debt decreased to $4,703.3 million as of January 3, 2026, down from $5,602.6 million as of December 28, 2024[4] Shareholder Returns - Dividends per share increased to $0.83 in Q4 2025 from $0.82 in Q4 2024, reflecting a commitment to return value to shareholders[2] Non-GAAP Measures - Adjusted EBITDA for Q4 2025 was $497.3 million, representing 13.5% of net sales, compared to $378.3 million and 10.2% in Q4 2024[16] - The company reported a non-GAAP adjusted EBITDA of $64.1 million in Q4 2025, up from $49.3 million in Q4 2024[20] - Non-GAAP organic revenue growth for the company was -3% in Q4 2025, with a notable decline of -5% in North America[19] - Non-GAAP adjustments for year-to-date 2025 included $396.2 million before income taxes, compared to $466.0 million in year-to-date 2024[16] Strategic Initiatives - The company announced a definitive agreement to sell its Consolidated Aerospace Manufacturing business, with related assets classified as held for sale[8] - The company implemented a voluntary retirement program in June 2025, resulting in costs of $11.5 million year-to-date[20] - The company incurred supply chain transformation costs of $2.4 million in Q4 2025, with year-to-date costs totaling $19.0 million, down from $66.3 million in 2024[18] - The company achieved a gain of $8.1 million from the sale of a distribution center as part of its supply chain transformation efforts[20] Environmental and Impairment Charges - Environmental charges in 2024 were recorded at $143.2 million, primarily due to regulatory changes affecting the Centredale Superfund site[20] - Asset impairment charges in 2025 totaled $20.4 million, with significant impacts from brand prioritization strategy updates[20]

Core Insights - Stanley Black & Decker reported solid financial results for the fourth quarter and full year 2025, highlighting growth in gross margin and net income despite a challenging operating environment [1][4] - The company generated strong cash flow, which supported its capital allocation priorities, including shareholder dividends and debt reduction [1][16] Fourth Quarter Highlights - Net sales for Q4 2025 were $3.7 billion, a decrease of 1% compared to the prior year, with a 3% decline on an organic basis [7] - Gross margin improved to 33.2%, up 240 basis points year-over-year, while adjusted gross margin reached 33.3%, an increase of 210 basis points [7][8] - Earnings per share (EPS) for Q4 was $1.04, with adjusted EPS at $1.41 [7] - Free cash flow for the quarter was $883 million, driven by operational efficiencies and tariff mitigation [8] Full Year Highlights - Total net sales for 2025 were $15.1 billion, down 2% from the previous year, with a 1% decline on an organic basis [7] - The full-year gross margin was 30.3%, an increase of 90 basis points year-over-year, while adjusted gross margin was 30.7%, up 70 basis points [7] - Full-year EPS was $2.65, with adjusted EPS at $4.67 [7] - Free cash flow for the year was $688 million, contributing to a total debt reduction of approximately $240 million [16] Segment Performance - The Tools & Outdoor segment reported net sales of $13.2 billion, down 2% year-over-year, with a segment margin of 10.1% [12] - The Engineered Fastening segment saw a 6% increase in net sales, driven by strong demand in aerospace and automotive, with a segment margin of 10.0% [11][12] Cost Management and Strategic Initiatives - The Global Cost Reduction Program achieved approximately $120 million in incremental pre-tax run-rate savings in Q4, totaling $2.1 billion since its inception in mid-2022 [14] - The company announced a definitive agreement to divest the Consolidated Aerospace Manufacturing (CAM) business for $1.8 billion, expected to close in the first half of 2026, which will significantly reduce debt leverage [15][16] 2026 Outlook - The company anticipates 2026 EPS to range from $3.15 to $4.35 on a GAAP basis and $4.90 to $5.70 on an adjusted basis, representing growth of 42% and 13% respectively at the midpoint [17] - Free cash flow is expected to be between $700 million and $900 million, reflecting a 16% increase at the midpoint [17]

Core Insights - Artificial intelligence (AI) is identified as the greatest investment opportunity of the current era, with a strong emphasis on the urgency to invest now [1][13] - The energy demands of AI technologies are highlighted, with data centers consuming as much energy as small cities, leading to concerns about power grid strain and rising electricity prices [2][3] Investment Opportunity - A specific company is positioned as a critical player in the AI energy landscape, owning essential energy infrastructure assets that will benefit from the increasing energy demands of AI [3][7] - This company is described as a "toll booth" operator in the AI energy boom, profiting from the surge in electricity demand driven by AI advancements [4][5] Market Position - The company is noted for its unique capabilities in executing large-scale engineering, procurement, and construction (EPC) projects across various energy sectors, including nuclear energy [7][8] - It is completely debt-free and has a significant cash reserve, amounting to nearly one-third of its market capitalization, which positions it favorably compared to other heavily indebted energy firms [8][10] Growth Potential - The company also holds a substantial equity stake in another AI-related venture, providing investors with indirect exposure to multiple growth opportunities in the AI sector [9][10] - The stock is described as undervalued, trading at less than seven times earnings, which presents a compelling investment case given its ties to the booming AI and energy markets [10][11] Industry Trends - The ongoing trends of onshoring, driven by tariffs, and the surge in U.S. LNG exports are expected to further enhance the company's market position [6][14] - The influx of talent into the AI sector is anticipated to drive continuous innovation and advancements, reinforcing the long-term growth potential of investments in AI [12]

Core Viewpoint - Stanley Black & Decker, Inc. is set to report its fourth-quarter 2025 results on February 4, with expected revenues of $3.76 billion, reflecting a 1.1% year-over-year growth, while adjusted earnings are projected at $1.27 per share, indicating a 14.8% decline from the previous year [1][9]. Group 1: Earnings Estimates and Performance - The consensus estimate for earnings has remained stable over the past 60 days, with the company having a strong earnings surprise history, outperforming estimates in the last four quarters with an average surprise of 57.8% [2]. - The Tools & Outdoor segment is anticipated to see a revenue increase of 1% year-over-year to $3.26 billion, driven by strong performance in the DEWALT business and a recovery in outdoor product demand [3]. - The Engineered Fastening segment is expected to grow by 1.9% year-over-year to $502 million, supported by strength in the aerospace market and recovery in the automotive sector, despite challenges in the general industrial market [4]. Group 2: Challenges and Cost Management - The company has been facing high costs and operating expenses, which are likely to impact performance, alongside supply-chain challenges and labor shortages, particularly in the aerospace market [5]. - Despite these challenges, Stanley Black's cost-reduction program is expected to positively influence its bottom line, with anticipated healthy margin performance due to supply-chain transformation and inventory reduction efforts [6]. Group 3: Earnings Prediction Insights - The earnings prediction model indicates that Stanley Black does not conclusively show an earnings beat this time, with an Earnings ESP of -1.56%, as the most accurate estimate is $1.25 per share, lower than the consensus estimate of $1.27 [7][8].

Core Insights - The article compares Stanley Black & Decker (SWK) and Lincoln Electric Holdings (LECO) to identify which stock presents a better value opportunity for investors in the Manufacturing - Tools & Related Products sector [1] Group 1: Zacks Rank and Earnings Outlook - Stanley Black & Decker has a Zacks Rank of 2 (Buy), indicating a positive earnings estimate revision trend, while Lincoln Electric Holdings has a Zacks Rank of 3 (Hold) [3] - The Zacks Rank suggests that SWK has an improving earnings outlook, which is a critical factor for value investors [3] Group 2: Valuation Metrics - SWK has a forward P/E ratio of 14.99, significantly lower than LECO's forward P/E of 24.12, indicating that SWK may be undervalued [5] - The PEG ratio for SWK is 1.12, while LECO's PEG ratio is 1.61, suggesting that SWK offers better value when considering expected earnings growth [5] - SWK's P/B ratio is 1.41 compared to LECO's P/B of 10.02, further supporting the notion that SWK is undervalued relative to its book value [6] Group 3: Value Grades - Based on the valuation metrics, SWK has a Value grade of B, while LECO has a Value grade of D, indicating that SWK is the superior value option at this time [6]

Core Viewpoint - Momentum investing focuses on "buying high and selling higher" rather than traditional strategies of "buying low and selling high" [1] Group 1: Momentum Investing Strategy - Momentum investors often face challenges in determining the right entry point for fast-moving stocks, which can lead to limited upside or potential losses [2] - A safer approach involves investing in bargain stocks that exhibit recent price momentum, utilizing tools like the Zacks Momentum Style Score to identify suitable candidates [3] Group 2: Stanley Black & Decker (SWK) Analysis - Stanley Black & Decker (SWK) has shown a four-week price change of 8.9%, indicating growing investor interest [4] - Over the past 12 weeks, SWK's stock has gained 23.3%, with a beta of 1.2, suggesting it moves 20% more than the market [5] - SWK has a Momentum Score of B, indicating a favorable time to invest based on momentum [6] - The stock has a Zacks Rank 2 (Buy) due to upward revisions in earnings estimates, which attract more investors [7] - SWK is currently trading at a Price-to-Sales ratio of 0.84, suggesting it is undervalued at 84 cents for each dollar of sales [7] Group 3: Additional Investment Opportunities - Besides SWK, there are other stocks that meet the criteria of the 'Fast-Paced Momentum at a Bargain' screen, presenting further investment opportunities [8] - Investors can explore over 45 Zacks Premium Screens tailored to different investing styles to identify potential winning stocks [9]

Leadership Changes - Effective October 1, 2026, Debra Crew will become Chair of the Board upon the retirement of Donald Allan, Jr., who has served as Executive Chair since stepping down as CEO on October 1, 2025 [1] - Debra Crew will also assume the role of Lead Independent Director immediately, succeeding Andrea Ayers, who will retire from the Board at the annual meeting of shareholders in April after over 11 years of service [2] Board Composition - Debra Crew has been a director at Stanley Black & Decker since December 2013 and has served on the Compensation and Talent Development Committee and the Finance and Pension Committee [3] - Shane M. O'Kelly, President and CEO of Advance Auto Parts, Inc., will join the Board of Directors effective January 23, 2026, bringing expertise in supply chain management and customer-focused strategy [5][6] Executive Background - Debra Crew previously served as CEO of Diageo plc from June 2023 to July 2025 and has held senior executive roles at companies such as Reynolds American, PepsiCo, Kraft Foods, Nestlé S.A., and Mars, Inc. [4] - Shane O'Kelly has been President and CEO of Advance Auto Parts, Inc. since September 2023 and has held leadership positions at HD Supply, PetroChoice Holdings, and A.H. Harris & Sons [6][7] Company Overview - Stanley Black & Decker, founded in 1843 and headquartered in the USA, is a global leader in tools and outdoor products, employing approximately 48,000 people [8]

Core Insights - DEWALT, in collaboration with August Robotics, has launched the world's first downward drilling, fleet-capable robot aimed at enhancing the efficiency of concrete drilling for data center construction [1][3]. Company Developments - The robotic solution has been piloted in 10 phases of data center construction with a leading tech company, achieving drilling speeds up to 10 times faster than traditional methods and reducing construction timelines by 80 weeks [3][7]. - The robot has demonstrated a drilling accuracy of 99.97% across over 90,000 holes, significantly improving construction output and cost efficiency [5][7]. Industry Context - Hyperscalers, which represent nearly 80% of overall data center demand, are projected to invest approximately $7 trillion in data center infrastructure by 2030 to support the growing needs for AI computing [4]. - The introduction of this robotic solution aligns with the rapid expansion of over 400 data centers currently in development globally, addressing the increasing demand for efficient construction methods [7].

Core Viewpoint - Stanley Black & Decker is highlighted as a reliable investment option within the Dividend King category, known for its consistent dividend payments and stable performance despite a lack of media attention [4][9]. Company Overview - Founded in 1843, Stanley Black & Decker operates from New Britain, Connecticut, and is a major player in the tool industry, offering products under various well-known brands [7]. - The company specializes in hand tools, power tools, and related products, making it a straightforward business to understand for consumers [7]. Financial Performance - The current market capitalization of Stanley Black & Decker is $13 billion, with a share price of $84.61 and a dividend yield of 3.9%, which is nearly double the average S&P 500 stock's yield of 2% [6][4]. - The company has a five-year dividend growth rate of 3.49%, indicating a strong commitment to maintaining and growing its dividend payments [9]. - Despite stagnant revenue growth in recent years, Stanley Black & Decker consistently beats earnings estimates, showcasing its operational reliability [8]. Investment Potential - The stock has shown early momentum in 2026, with a price increase of approximately 13.5% since the beginning of the year, suggesting potential for future growth [10]. - The company is considered a solid choice for passive investors, as it is expected to continue paying or increasing its dividend, making it suitable for a dividend reinvestment plan (DRIP) [11][12].