Financials: Stanley Black & Decker, Makita, United Rentals
Stanley Black & Decker (Dewalt, Craftsman)
Reporting its Q2 2024 financial results, Stanley Black & Decker said that its net sales decreased 3% for the quarter versus prior year to $4.0 billion, adding that “volume growth (+2%) was offset by the previously announced Infrastructure business divestiture (-3%), currency (-1%) and price (-1%).”
Tools & Outdoor net sales were flat versus second quarter 2023 with Dewalt and outdoor leading volume gains (+2%) that were partially offset by price (-1%) and currency (-1%). Revenues were up 1% in North America and down 3% in Europe while the rest of world was up +5%. Second quarter U.S. retail point-of-sale demand was up modestly versus the prior year led by outdoor growth and recaptured Dewalt cordless promotions. The Tools & Outdoor segment margin was 9.0%, up 610 basis points versus prior year. Industrial net sales were down 20% versus second quarter 2023 as the Infrastructure divestiture (-20%) and currency (-2%) was partially offset by price (+2%).
“We extended our trajectory of solid execution on our operational priorities, which drove gross margin improvement versus the prior year and strong cash generation in the second quarter. Strength in Dewalt, outdoor and aerospace fasteners combined to yield organic growth amidst a weak consumer backdrop,” said Donald Allan, Jr., Stanley Black & Decker’s president & CEO.
“As we look to the back half of 2024, we expect mixed demand trends across our markets. With that in mind, we remain focused on implementing supply chain improvements designed to reshape our cost structure and expand margins, delivering earnings growth and generating strong cash flow. We are continuing to reinvest a portion of the savings to fund new growth investments intended to further strengthen our powerful brands, accelerate innovation and deploy differentiated market activation to capture compelling long-term opportunities in our industry.
The Company’s primary areas of multi-year strategic focus:
“Looking forward, we remain focused on executing our supply chain improvements to further improve gross margin and earnings in the second half of 2024 and our progress to date supports our improved full year adjusted earnings and free cash flow outlook,” said Patrick D. Hallinan, executive vice president and CFO.
- Advancing innovation, electrification, and global market penetration to achieve organic revenue growth of 2 to 3 times the market
- Streamlining and simplifying the organization, and investing in initiatives that more directly impact our customers and end users
- Returning adjusted gross margins to historical 35%+ levels by accelerating the operations and supply chain transformation to improve fill rates and better match inventory with customer demand
- Prioritizing cash flow generation and inventory optimization
Makita
Makita released its consolidated financial results for the three months ended June 30, 2024, beginning with this statement: “Looking at the international economic situation during the first three months of the current fiscal year, although there were signs of a move toward interest rate cuts in the United States and Europe, inflationary pressures remained persistent and monetary tightening continued. In addition to this, the real estate market in China remained sluggish, and the overall economic environment continued to be weak. The outlook continues to be uncertain due to escalating caution on geopolitical risks including Russia’s prolonged invasion of Ukraine and instability in the Middle East.
In the Group’s consolidated business results for this period, despite continued slow demand for housing and restrained investment in the building and construction market due to monetary tightening in various countries, consolidated revenue increased 5.1% year on year to 193,932 million yen, due to the impact of depreciation of the yen against local currencies.
Revenue results by region:
- In Japan, sales of cordless OPE remained strong, despite a difficult demand environment, including a decline in housing starts. As a result, revenue was 30,515 million yen, up 1.8% year on year.
- In Europe, although the building and construction market remained sluggish due to high interest rates, orders recovered following inventory adjustments and the yen depreciated against the local currencies. As a result, revenue was 98,379 million yen, up 10.2% year on year.
- In North America, monetary tightening continued, and housing-related demand remained weak with a decrease in sales, mainly for home improvement retailers. As a result, revenue was 21,644 million yen, down 12.8% year on year.
- In Asia, demand for tools remained weak overall amid the stagnant Chinese economy. As a result, revenue was 10,752 million yen, down 3.3% year on year.
- In Central and South America, sales recovered in the major countries, and we made efforts to expand sales of the 40Vmax series in various countries. As a result, revenue was 12,774 million, up 14.0% year on year.
- In Oceania, although the impact of monetary tightening due to inflation and the sluggish real estate market continued, sales of cordless OPE underpinned our sales and the yen also depreciated against the local currencies. As a result, revenue was 16,022 million yen, up 11.3% year on year.
- In the Middle East and Africa, although there were variations depending on the country, demand for tools remained sluggish overall, but the yen depreciated against the local currencies. As a result, revenue was 3,846 million yen, up 4.2% year on year.
United Rental
On July 24, United Rentals, Inc. announced financial results for the second quarter of 2024 and reaffirmed, at mid-point, its 2024 outlook, while narrowing the outlook ranges for revenue and adjusted EBITDA.
Rental revenue increased 7.8% year-over-year to a second quarter record of $3.215 billion. Fleet productivity increased 4.6% year-over-year, including the impact of the Yak acquisition, and increased 3.0% excluding the impact of the Yak acquisition, while average original equipment at cost (“OEC”) increased 2.7%.
Used equipment sales in the quarter decreased 4.5% year-over-year. Used equipment sales generated $365 million of proceeds at a GAAP gross margin of 47.4% and an adjusted gross margin9 of 51.8%, compared to $382 million at a GAAP gross margin of 51.3% and an adjusted gross margin of 57.3% for the same period last year. The year-over-year declines in the GAAP and adjusted gross margins primarily reflected the continued normalization of the used equipment market, including pricing.
Net income for the quarter increased 7.6% year-over-year to a second quarter record of $636 million, while net income margin increased 30 basis points to 16.9%. The increase in net income margin was primarily driven by higher gross margin from rental revenue, which included the impact of a decrease in depreciation expense as a percentage of revenue, and reduced restructuring charges due to 2023 charges associated with the restructuring program initiated following the December 2022 acquisition of Ahern Rentals, Inc. (“Ahern Rentals”), partially offset by decreased gross margin from used equipment sales as discussed above.
Matthew Flannery, chief executive officer of United Rentals, said, “We were pleased with our record second-quarter results across revenue, adjusted EBITDA and EPS, as 2024 continues to play out as we expected. The integration of Yak remains on track. This acquisition builds upon our one-stop shop strategy of providing customers a best-in-class rental experience through our general rentals and specialty offerings. The team’s steadfast focus on providing this unique value proposition to our customers, coupled with an unwavering focus on safety, operational excellence and innovation, remains the cornerstone of our strategy and enables us to drive long-term shareholder value.”
Flannery continued, “As we enter the second half of 2024, we are confident that our consistent execution will enable us to deliver on our updated guidance, with the mid-point for both revenue and adjusted EBITDA reaffirmed, and our expectations for capex and free cash flow unchanged. We continue to see particular strength in large projects, and believe we are uniquely positioned to capitalize on these opportunities in addition to other long-term avenues of growth.”
