By Sam Boughedda
Morgan Stanley downgraded Stanley Black & Decker (NYSE:SWK) to Equal Weight from Overweight, cutting the price target to $82 from $110 per share in a note to clients on Wednesday.
Analysts told investors the firm sees a more balanced risk/reward compared to other names in its group for Stanley Black & Decker, "given a softened market, recent de-rating, and price/cost risks."
"Following a strong pull-forward in demand during 2021, SWK's Tools & Outdoor segment is expected to see a slowed demand environment in the near future along with compressed margins," wrote the analysts.
They explained that the company utilized pricing during the DIY peak to sustain margins amid cost inflation, but Morgan Stanley sees this trend reversing with SWK giving back price during 2023.
"On the other end, while we expect raw materials to be deflationary for the group in 2023, we do not believe SWK will realize the same benefits as its inputs are less exposed to raw materials than others in our coverage. Along with these risks, we believe SWK's plans to focus the business have resulted in a derating, as the stock has recently traded more like the building products group than true multi-industry companies," added the analysts.