The COVID-19 pandemic has seriously dimmed most people’s enthusiasm for being out and about. With stay-at-home and social distancing mandates in place, people generally are spending significant time indoors, which has motivated many to revamp and/or upgrade their living spaces. This inclination toward home improvement has boosted  demand for companies that cater to home renovation needs.

Even though large-scale vaccine deployment will likely lead people to spend more time away from their homes, learn- and work-from-home arrangements are likely to remain a prominent societal feature this year. Moreover, many people are likely to remain engaged in improving their homes, driving a continued uptick in home improvement activity. In fact, as housing prices have continued to rise, homes have become an even more important financial asset for most families. As such, their incentive to invest in the asset has become stronger.

As  demand in the home-improvement arena is expected to persist, we believe key industry players, such as Stanley Black & Decker, Inc. (SWK), Snap-on Incorporated (SNA), and Lumber Liquidators Holdings, Inc. (LL) should enjoy tremendous growth this year and beyond.

Stanley Black & Decker, Inc. (SWK)

Formerly known as The Stanley Works, SWK is engaged in tools and storage, industrial, and security businesses worldwide. It offers products including  power tools, construction equipment, electric security services, and fasteners through retailers, distributors, and a direct sales force to professional end users, retail consumers, and industrial customers in various industries.

In October, SWK priced an offering of $750 million of 2.750% notes due 2050. SWK will use the offering’s proceeds of approximately $739.5 million  to  redeem outstanding notes.

SWK’s net sales increased 18.7% year-over-year to $4.41 billion for the fourth quarter ended January 2, 2021. Its gross margin has grown by 390 basis points from the year-ago value to 35.6%, while its net income grew 130% from the prior-year quarter to $458 million. The company’s EPS has risen 117.9% year-over-year to $2.92 over this period, and its net cash derived from  its operating activities increased 14.4% year-over-year.

A consensus EPS estimate of $2.51 for the current quarter ending March 31, 2021 represents  a 109.2% improvement from the year-ago value. SWK  also beat the Street’s EPS estimates in each of the four trailing quarters, which is impressive. The consensus revenue estimate of $3.91 billion for the current quarter represents 25% growth from the same period last year. The stock has gained 5.9% over the past year.

SWK’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B,  which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

SWK has a grade of A for Growth, B for Value, and C for Quality. Of the 64 stocks in the A-rated Home Improvement & Goods industry, SWK is ranked #16. .

In addition to the POWR Ratings grades I have just highlighted, you can see the SWK ratings for Stability, Sentiment, and Momentum here.

Snap-on Incorporated (SNA)

SNA is a manufacturer and seller of tools, equipment, diagnostics, and repair information and systems solutions for professional users worldwide. The company operates through its Commercial & Industrial Group, Snap-on Tools Group, Repair Systems & Information Group, and Financial Services segments.

Last year, SNA announced the acquisition of AutoCrib, Inc. for approximately $36 million. The acquisition should complement and expand the company’s existing tool-control offering to customers in a variety of industries.

SNA’s net sales increased 12.5% year-over-year to $1.07 billion in the fourth quarter ended December 31, 2020. Its operating margin increased 220 basis points from the year-ago value to 20.1%, while its gross profit grew 14.6%. The company’s net income rose 22.5% year-over-year to $208.9 million and its EPS rose 23.4% to $3.85. SNA’s Snap-on Tools Group segment sales of $494.9 million in the quarter increased 20.2% from the prior-year quarter.

A consensus EPS estimate of $11.91 for 2022 represents  a 3.4% increase year-over-year. In fact, SNA beat the Street’s EPS estimates in three of the four trailing quarters. The consensus revenue estimate of $3.79 billion for the next year represents  a 4% increase from the same period last year. The stock has gained 16.1% over the past year.

SNA’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. SNA has a Quality Grade of A, Value Grade of B, and Growth Grade of C. Among the 64 stocks in the same industry, it is ranked #17.

To see additional POWR Ratings for Stability, Momentum, and Sentiment for SNA, click here.

Lumber Liquidators Holdings, Inc. (LL)

Headquartered in Virginia, LL is a multi-channel specialty retailer of hard-surface flooring, and hard-surface flooring enhancements and accessories. The company provides hardwood products, porcelain tile flooring products, and a selection of flooring enhancements and accessories. It also markets  in-home delivery and installation services primarily to homeowners.

LL’s net sales for the third quarter ended September 30, 2020 have  increased 12.1% year-over-year to $296 million. The company’s comparable store sales increased 10.9%, primarily because of healthy consumer demand for home improvement projects. Its gross margin increased 320 basis points from its year-ago value to 39.4%, while its gross profit rose 22%.

LL has beaten the Street’s EPS estimates in each of the four trailing quarters. The consensus revenue estimate of $283.83 million for the next quarter, ending March 31, 2021, represents a 6.2% increase year-over-year. The stock has gained 286.3% over the past year.

It is no surprise that LL has an overall rating of A, which equates to Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

LL has a grade of A for Momentum, and B for both Value and Quality. In the same industry, it is ranked #5.

Click here to see the additional POWR Ratings for LL (Stability, Growth, and Sentiment).

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SWK shares were trading at $177.76 per share on Friday afternoon, up $2.12 (+1.21%). Year-to-date, SWK has declined -0.45%, versus a 3.81% rise in the benchmark S&P 500 index during the same period.

About the Author: Imon Ghosh

Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...

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