COVID-19's early 2020 arrival and the resultant temporary government lockdowns, social distancing, and closure of many popular indoor entertainment venues triggered surging interest in outdoor activities.
Even with the pandemic somewhat retreating in 2021, this outdoor trend continues gathering strength. It manifests in everything from a big surge in recreational vehicle (RV) sales and use to eager swarms of new golfers sending golf equipment suppliers' revenues skyrocketing.
This outdoor renaissance has affected multiple sectors and is creating potential winners, including these three disparate companies: Stanley Black & Decker (SWK +0.36%), Dick's Sporting Goods (DKS +0.12%), and Deere & Company (DE 0.86%).
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1. Stanley Black & Decker
Stanley Black & Decker isn't the first company springing to the mind of many when discussing the great outdoors. However, the toolmaker just announced its acquisition of Excel Industries, "a leading designer and manufacturer of premium commercial and residential turf-care equipment." Gaining the BigDog mower and Hustler turf equipment brands, plus "an extensive dealer network, a talented team, and a loyal customer base," seemed like an important acquisition and Stanly Black & Decker was willing to dish out $375 million in cash for this new subsidiary.
The now-larger company should boost its profits measurably through its increased presence in lawn care and outdoor equipment sales, according to its projections. Management predicts a "modest" boost to its earnings per share (EPS) from sales of Excel turf care equipment. Three years from now, in 2024, it expects EPS to be increased about $0.15 to $0.20 by the acquisition.
This is the second lawn and outdoor power equipment acquisition Stanley Black & Decker has made in recent weeks. After buying a 20% stake in Troy-Bilt tiller and mower owner MTD Holdings in 2019, it announced it was snapping up the remaining 80% on Aug. 17 for $1.6 billion. Stanley Black & Decker CEO James Loree said the acquisitions "will create a global leader in the $25 billion and growing outdoor category."
MTD Holdings is expected to increase Stanly Black & Decker's EPS by $0.50 in 2022 and $1 by 2025. With demand for lawn care and gardening equipment soaring, these two additions to Black & Decker's operations look like winning moves and should give a strongly positive boost to its revenue for the medium and long term.
2. Dick's Sporting Goods
Dick's Sporting Goods stock price is up about 133% since the start of the year compared to the S&P 500's 15.5% gain over the same period. A big contribution to that outsized increase is that Dick's has also been energized by the strengthening outdoors market. Its second quarter (Q2) report showed its sales and margins both rising fast. As a result, Dick's hiked its dividend by 21%, then stacked a $5.50 per share special September dividend on top of that.
The company is also increasing its share buyback program to help make outstanding shares more valuable for its investors. It previously stated it would buy back $200 million during the year, but has now accelerated its timetable and doubled the buyback to $400 million for 2021. It still has $879 million in repurchases authorized through mid-2024.
While the first and second quarter both delivered outstanding results for the company, Dick's apparently expects a vigorous second half, too, with strong holiday sales on the menu. It increased its full-year adjusted EPS guidance by 4%, up to $12.95 from the previous $12.45. With MasterCard predicting a 7.4% jump in U.S. holiday sales for 2021, Dick's is hiring "the largest number of seasonal associates in the company's history for the 2021 holiday season" according to a press release. About 10,000 more workers will be temporarily added to the payroll, showing Dick's Sporting Goods also still has plenty of momentum from the rise in outdoor activities.
3. Deere & Co.
While Stanley Black & Decker and Dick's Sporting Goods operate in the category of consumer discretionary stocks, maker of heavy equipment Deere & Co. has also seen a boost from the lawn and outdoors craze. Rising farm and agricultural equipment demand is driving its recent powerful revenue and earnings gains, but smaller equipment designed for lawn and landscape care is contributing to its success, too.
During the company's fiscal third-quarter 2021 earnings conference call on Aug. 20, Brent Norwood, a manager of investor communications, noted Q3 sales of small agricultural and turf machines rose to nearly $3.2 billion, a 32% jump year over year. The gain came both from sharply increased shipments and the willingness of customers to pay higher prices for these vehicles and items of equipment. Deere expects small agricultural and turf sales to be up 10% during 2021 as a whole in Canada and the U.S.
The case of Deere shows industrial stocks are also gaining from Americans seeking pleasure and diversion under the open sky, away from the risk of coronavirus infection or the discomforts and inconveniences of indoor masking, capacity limits, and the like. The alfresco fad still seems to have plenty of energy left, as Americans discover they enjoy outdoor activities, and this will likely deliver bullish gains for these three companies into at least the medium term, if not beyond.
