February 19, 2013 08:00 ET

Machinery & Tools Stocks in the Recovery Phase

The Provides Stock Research on Stanley Black & Decker Inc. and Kennametal Inc.

NEW YORK, NY--(Marketwire - Feb 19, 2013) - Machinery & tools stocks are getting a breather thanks to the improvement in the economy. However, these companies are not completely out of the woods yet. Even the most prominent companies like Kennametal Inc. (NYSE: KMT) announced lower-than-expected results and have cut their outlook. However, Stanley Black & Decker Inc. (NYSE: SWK) bucked the trend and posted higher profits. The overall scenario is machinery stocks look optimistic as the U.S. economy and the global economy are showing signs of recovery.

Access our free reports on Stanley Black & Decker Inc. and Kennametal Inc. Traders can also connect to our Wall Street Trading Floor where our research desk and market pros are standing between 8:50 am to 4:15 pm ET at 

Stanley Black & Decker's stock is up 6 percent on a YTD basis. The stock also has 2.50 percent dividend yield and thus is an attractive income stock. Another bonus point is that the company has 45 years of consistent dividend payment history. Its dividend growth rate stands at 8.3 percent and it has low payout ratio of 30 percent, which ensures that the company is likely to keep dividend payments steady into the coming future. However, not everything is bright and sunny with Stanley Black & Decker Inc. The stock saw frequent insider selling the past couple of months. Recently the company Sr. VP Brett Bontranger sold $1.2 million worth of shares, which was followed by $1.48 million worth of shares sold by William Scott Taylor, a president with Stanley Black & Decker.

Stanley Black & Decker recently reported its fourth quarter and full year results. Its revenue increased 4 percent to $2.7 billion for the fourth quarter while its EPS stood at $1.37. The company also improved its margins, which is likely to get translated into better stock price. However, the company provided conservative forecast for FY2013.

Stanley Black & Decker will also benefit from the recent uptick in the housing sector. The company has taken some steps to increase its efficiency as it divested its Hardware & Home Improvement Group. It sold the unit to Spectrum Brand Holdings Inc. for $1.4 billion. Stanley Black & Decker will use part of the proceeds to repurchase its stock, adding to its shareholders' value.

Kennametal reported disappointing results for its second quarter. The company's profit dropped to $42.1 million from $73.7 million it had reported a year earlier. Its revenue also declined 1 percent to $633.1 million. For its entire year, the company now expects to earn in the range of $2.60 and $2.80 per share, while its earlier forecast was in the range of $3.40 and $3.70 per share. The downward revision of the forecast may have negative effect on the share price.

Kennametal had reported equally weak results for its first quarter. The company is likely to maintain the streak as is evident from its outlook cut. Despite the negative results, the stock has performed rather well as it is up 4.5 percent on a YTD basis. It also offers 1.53 percent dividend yield. However, the stock also has good upside potential as the company is likely to recover with the impending recovery in economic scenario. While, the current year will be a difficult one for Kennametal, the company is a good bet for long-term investment.

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