SWK · Q1 2026 Earnings

Q: Unpacking the gross margin improvement from first half to second half (~400 bps), specifically the contribution from CAM benefits, tariffs, USMCA compliance, and productivity.

Pat Ryan provided detailed breakdown: 40% from net productivity benefits via continuous improvement initiatives, ~40% from adjusting fixed cost structure to current volume environment, and ~20% from ongoing tariff mitigation efforts. Management expressed confidence in achieving 35%+ gross margin by Q4 2026, sustained by cost structure alignment to volume and inflation management.

Q: Understanding the volume environment in Tools & Outdoor, outdoor pickup drivers, expected volume trends for rest of year, and price/cost elasticity dynamics.

Chris Nelson attributed outdoor strength to strong preseason execution and order fulfillment positioning for spring season. On underlying demand, management sees flat market with growth expected via market share gains and Q2 comps benefit (lapping previous year promotional disruption). Price net of cost delta remains consistent with guidance; no material changes to pricing strategy despite tariff/inflation movements offsetting each other.

Q: Competitive pricing dynamics in Q1 with competitors raising prices; POS performance tracking; and timing/materiality of Craftsman brand relaunch.

Management noted more competitive pricing emerged in Q1 as anticipated, creating a more 'even playing field.' Surgical adjustments to promotions on elastic items performed in line with modeling. Craftsman relaunch will be phased with largest NPD launch cycle by year-end, with benefit visibility expected in late 2026 into 2027. Stanley brand already showing green shoots for mid-year growth inflection.

Q: Status of USMCA tariff qualification initiatives and China tariff mitigation progress.

Management reported USMCA qualification progress ahead of pace: currently at roughly one-third qualified, moving toward or exceeding industrial averages. China sourcing reduction on track for <5% of US sales by year-end. Team executing consistently despite tariff policy modifications; prioritizing customer availability while continuing cost mitigation through operational moves and global footprint leverage.

Q: CAM divestiture impact quantification and offsetting interest benefits; OPG gas walk-behind product transition timing.

Pat Ryan detailed CAM Q2 impact: ~$110M net sales reduction, ~$15M pre-tax profit reduction offset by similar interest expense reduction, resulting in net zero impact to Q2 and full-year adjusted EPS. OPG gas walk-behind transition to licensed model in back third of 2026 represents ~$200M top-line change, net-net accretive to bottom line, with benefit visibility in late 2026/early 2027.

Cautious

Stanley Black & Decker

Reported April 29, 2026

30-second summary

Q1 revenue grew 2.7% YoY to $3.85B with organic essentially flat (T&O -1%, EF +7%), and adjusted EPS of $0.80 cleared the $0.55–$0.60 framework by roughly $0.20 — a meaningful beat against management's own Q1 placeholder. Adjusted gross margin of 30.2% was down 20bps YoY (essentially flat) and consistent with the H1 compression plan, while management reaffirmed the 35%+ Q4 2026 exit and quantified the H1→H2 bridge at ~400bps (40% productivity / 40% fixed cost / 20% tariff mitigation). FY2026 guidance was reaffirmed at $4.90–$5.70 adj EPS and $700–$900M FCF ex-CAM fees ($500–$700M including), with revenue now "about flat" YoY (vs. prior flat-to-up) reflecting CAM removal, LSD organic preserved, and adjusted GM expansion of ~150bps held. Q2 guide set at ~$3.9B revenue and $1.15–$1.25 adj EPS. Free cash outflow of $447M was a touch better than Q1 2025's $485M outflow, and management confirmed CAM removes ~$110M of Q2 sales / ~$15M of pre-tax profit (offset by ~$15M lower interest, net neutral to EPS); the board also authorized a $500M share repurchase program funded by ~$1.57B of CAM net proceeds.

Headline numbers

EPS

Q1 FY2026

$0.80

Revenue

Q1 FY2026

$3.85B

+2.7% YoY

Gross margin

Q1 FY2026

30.1%

Free cash flow

Q1 FY2026

$-0.45B

Operating margin

Q1 FY2026

4.2%

Key financials

Q1 FY2026

Metric	Q1 FY2026	YoY	Q4 FY2025	QoQ
Revenue	$3.85B	+2.7%	$3.68B	+4.4%
EPS	$0.80	—	$1.41	-43.3%
Gross margin	30.1%	—	33.2%	-310bps
Operating margin	4.2%	—	8.4%	-420bps
Free cash flow	$-0.45B	—	$0.88B	-150.7%

Guidance

No quantitative guidance provided for Q2 FY2026 or FY2026; prior quarter also lacked specific forward guidance.

Segment KPIs

Q1 FY2026

Segment	Q1 FY2026	YoY
Tools & Outdoor	$3.336B	+1.7%
Engineered Fastening	$0.511B	+10.2%

Other KPIs

Q1 FY2026

Segment	Q1 FY2026
Tools & Outdoor Segment Profit Margin	8.3%
Engineered Fastening Segment Profit Margin	11.9%
Adjusted EBITDA Margin	9.2%
Tools & Outdoor Organic Revenue Growth	-1%
Engineered Fastening Organic Revenue Growth	7%

Management tone

Q1 2025 tariff reset → Q2 2025 trade of top line for cash and EPS → Q3 2025 Nelson anchors 2026 on margin without volume help → Q4 2025 formal FY2026 guide + FCF credibility cleared → Q1 2026 execution proof on the EPS bar with the H1→H2 bridge quantified and a $500M buyback authorization unlocked by the CAM close.

Last quarter management committed to the FY2026 numerical framework and walked the H1 compression / H2 snap cadence at a high level; this quarter Pat Hallinan disaggregated the ~400bps H1→H2 gross margin walk into 40% net productivity (continuous improvement), 40% fixed cost structure alignment to current volume, and 20% tariff mitigation. That is the first quantitative decomposition of the bridge — and shifts the 35%+ Q4 2026 exit from a stated milestone to a sized program. The 35–37% by end-2028 anchor was reaffirmed from the prior call.

Three quarters ago elasticity was framed as one-for-one and holding; in Q4 it broke in opening price point and promotional categories; this quarter Nelson tells Baird's Tim Woj that "more competitive pricing emerged in Q1 as anticipated" creating a "more even playing field," with surgical promo adjustments performing in line with modeling. The shift is from defending elasticity to managing it as a known dynamic — a tonal softening that reflects the elasticity break being absorbed into planning rather than being a fresh credibility test.

Brand growth catalysts moved from generic "professional channel strength" to a specific timeline: Stanley brand inflecting to growth by mid-2026, and Craftsman's largest NPD launch cycle since acquisition landing in-market by year-end 2026 with benefit visibility in late 2026 / early 2027. The Craftsman push had been mentioned in prior quarters as a strategic priority; this is the first time management has anchored it to a specific in-market date and benefit-realization window.

The tariff posture moved from "responding to dynamic policy" (Q1 2025) and "no game changer" (Q3 2025) to a settled execution stance. Nelson flagged that the IEPA temporary benefit (now replaced by lower Section 122 tariffs) is expected to be replaced by Section 301 tariffs at similar levels — meaning management is no longer planning around relief and treats the tariff regime as a baseline. Hallinan sized the Section 232 policy change at just ~$15M annualized / <$10M for 2026, well below market speculation. The "availability first, cost mitigation second" framing from Sam Reed's Wells Fargo exchange confirms that service levels remain the binding constraint, not tariff arbitrage.

Capital allocation became materially more flexible. With ~$1.57B in CAM net proceeds applied largely to debt paydown and the 2.5x net debt/adjusted EBITDA target now in reach by year-end, the board authorized a $500M share repurchase program — the first explicit return-of-capital lever this cycle. Hallinan framed near-term deployment as "opportunistically repurchase our shares," with bolt-on M&A possible "if and when appropriate."

Q&A highlights

Nigel Coe · Wolf Research

Unpacking the gross margin improvement from first half to second half (~400 bps), specifically the contribution from CAM benefits, tariffs, USMCA compliance, and productivity.

Pat Ryan provided detailed breakdown: 40% from net productivity benefits via continuous improvement initiatives, ~40% from adjusting fixed cost structure to current volume environment, and ~20% from ongoing tariff mitigation efforts. Management expressed confidence in achieving 35%+ gross margin by Q4 2026, sustained by cost structure alignment to volume and inflation management.

~400 bps gross margin improvement H1 to H240% productivity benefits from continuous improvement~40% from fixed cost structure adjustments~20% from tariff mitigation

Julian Mitchell · Barclays

Understanding the volume environment in Tools & Outdoor, outdoor pickup drivers, expected volume trends for rest of year, and price/cost elasticity dynamics.

Chris Nelson attributed outdoor strength to strong preseason execution and order fulfillment positioning for spring season. On underlying demand, management sees flat market with growth expected via market share gains and Q2 comps benefit (lapping previous year promotional disruption). Price net of cost delta remains consistent with guidance; no material changes to pricing strategy despite tariff/inflation movements offsetting each other.

Underlying demand remains relatively flat YoYQ2 expected to show inflection from prior year promotional comparabilityPrice plan for 2026 consistent with opening guidanceTariff tailwinds offset by battery metals, tungsten, and war-related inflation

Tim Woj · Baird

Competitive pricing dynamics in Q1 with competitors raising prices; POS performance tracking; and timing/materiality of Craftsman brand relaunch.

Management noted more competitive pricing emerged in Q1 as anticipated, creating a more 'even playing field.' Surgical adjustments to promotions on elastic items performed in line with modeling. Craftsman relaunch will be phased with largest NPD launch cycle by year-end, with benefit visibility expected in late 2026 into 2027. Stanley brand already showing green shoots for mid-year growth inflection.

Craftsman: largest NPD launch cycle since acquisition, in-market by year-end 2026Stanley brand: expected to inflect to growth by mid-year 2026Promotional repositioning primarily in Q2SKU-level tracking shows price elasticity performing as modeled

Sam Reed · Wells Fargo

Status of USMCA tariff qualification initiatives and China tariff mitigation progress.

Management reported USMCA qualification progress ahead of pace: currently at roughly one-third qualified, moving toward or exceeding industrial averages. China sourcing reduction on track for <5% of US sales by year-end. Team executing consistently despite tariff policy modifications; prioritizing customer availability while continuing cost mitigation through operational moves and global footprint leverage.

USMCA qualification: ~33% currently, targeting industrial average or betterChina sourcing: <5% of US sales by year-end 2026 target (on pace)Strategy: availability first, cost mitigation via operations and footprint leverageContinuing original tariff mitigation path despite policy changes

Joe Ritchie · Goldman Sachs

CAM divestiture impact quantification and offsetting interest benefits; OPG gas walk-behind product transition timing.

Pat Ryan detailed CAM Q2 impact: ~$110M net sales reduction, ~$15M pre-tax profit reduction offset by similar interest expense reduction, resulting in net zero impact to Q2 and full-year adjusted EPS. OPG gas walk-behind transition to licensed model in back third of 2026 represents ~$200M top-line change, net-net accretive to bottom line, with benefit visibility in late 2026/early 2027.

CAM Q2 removal: $110M net sales, $15M pre-tax profit reductionInterest expense offset: ~$15M reduction (net neutral to EPS)OPG gas walk transition: ~$200M top-line, net-net accretive to bottom lineOPG timing: back third of 2026, benefit visibility 2027

Answers to last quarter's watch list

Q1 2026 adjusted gross margin print vs guide and adj EPS $0.55–$0.60 — Adj GM landed at 30.2%, down 20bps YoY and consistent with the H1 compression plan. Adj EPS at $0.80 cleared the $0.55–$0.60 framework by roughly $0.20, with above-the-line outdoor outperformance contributing about half and below-the-line items (Q1 tax rate landing at 26% vs. 30% planned) the remainder. The 30%+ floor flagged in the Q4 watch list held.

Resolved positively

CAM transaction close timing — Closed April 6, 2026, on the early side of the anticipated window. Hallinan confirmed CAM removes ~$110M of Q2 net sales and ~$15M of pre-tax profit, with offsetting ~$15M lower interest expense (net zero EPS impact). Net proceeds of ~$1.57B applied largely to debt paydown; $500M buyback authorization unlocked.

Resolved positively

T&O organic trajectory — Q1 T&O organic at -1% versus Q4's -4% organic shows stabilization. Nelson cited preseason outdoor execution as the proximate driver and expects a Q2 inflection (LSD organic growth) from lapping prior-year promotional disruption. The gap between professional strength (U.S. commercial/industrial channel +HSD) and consumer/DIY softness is narrowing in management's framing, though competitive pricing dynamics in Q1 confirm the elasticity break from Q4 is being actively managed. Status: Resolved positively (on stabilization), continue monitoring (on full inflection).

Engineered Fastening organic and margin — Q1 EF organic at +7% (vs Q4's +8%) and adjusted segment margin at 12.0% (+190bps YoY, driven by aerospace and automotive mix). The run rate is moderating slightly from the Q4 standout but remains above the FY low-to-mid-single-digit framework. Status: Continue monitoring — sustained at this level but slight cooling versus Q4 peak.

Gas-powered walk-behind license transition — Confirmed back third of 2026 timing for the OPG gas walk-behind transition to a licensed model, with ~$200M top-line impact and net-net accretive to bottom line. Benefit visibility expected in late 2026 / early 2027. Status: Resolved positively on execution and timing.

China sourcing share concrete print — Nelson confirmed pacing toward <5% by year-end and USMCA qualification at ~33% (targeting industrial averages or better, currently a little ahead of pace). No facility closure or capex specifics were disclosed. Status: Resolved positively on trajectory, partially on disclosure depth.

Working capital and FCF cadence into Q1 2026 — Q1 FCF outflow of $447M is modestly better than Q1 2025's $485M outflow. Inventory progress noted by Hallinan as ongoing toward pre-pandemic norms. Status: Continue monitoring — heavy generation in Q3/Q4 still required to clear the $700–900M ex-CAM-fees FY range.

What to watch into next quarter

Q2 adj gross margin print vs the ~+300bps YoY expansion guide — the H1 walk must hold for the H2 ~400bps snap to be credible. Any slippage raises questions about whether the productivity bridge (40% of the walk) is back-loaded enough to hit 35%+ in Q4.

Q2 organic revenue vs. the LSD growth guide — Julian Mitchell's exchange flags Q2 as the inflection point; watch whether the lap of prior-year promotional disruption materializes and whether T&O organic crosses zero.

CAM close confirmation and Q2 segment reporting — first quarter where CAM's removal will show in segment data; watch for clean disclosure of the $110M / $15M offsets versus reported lines, and the size/timing of the $260–280M GAAP gain on sale.

Tariff regime stability and IEPA→301 transition — Nelson flagged that the Section 122 temporary benefit is expected to be replaced by 301 tariffs at IEPA-equivalent levels by August; watch for any policy delta and whether the price/cost framing holds. Section 232 sized at <$10M for 2026 is a baseline to track.

Back-half pricing adjustments — Hallinan flagged that battery metals, tungsten, and war-driven inflation could prompt back-half or 2027 pricing adjustments if persistent; watch the Q2 print for early signals.

Stanley brand growth inflection by mid-year 2026 — first specific brand catalyst date management has anchored; watch Q2 POS data and Q3 commentary for evidence the inflection is arriving on schedule.

$500M buyback pace and net leverage glide to 2.5x by year-end — first explicit capital return lever this cycle; watch deployment cadence against the year-end leverage target.

FCF cadence — Q2 generation needs to start covering YTD outflow — Q1 2025 to Q2 2025 saw the swing from -$485M to +$135M; watch whether Q2 2026 delivers a similar or better inflow to keep the $700–900M ex-CAM-fees FY range in play.

Sources

Stanley Black & Decker Q1 FY2026 press release and supplemental financial materials (Exhibit 99.2), filed April 29, 2026.
Stanley Black & Decker Q1 FY2026 earnings call — prepared remarks (Chris Nelson, CEO; Patrick Hallinan, EVP, CFO and Chief Administrative Officer) and Q&A (Nigel Coe/Wolf Research, Julian Mitchell/Barclays, Tim Woj/Baird, Sam Reed/Wells Fargo, Jonathan Matuszewski/Jefferies, Joe Ritchie/Goldman Sachs).
Q1, Q2, Q3, Q4 FY2025 Tapebrief briefs — for trajectory context, prior guidance baselines, and watch list resolution.

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