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Stanley Black & Decker Missing Some Tools

NEW YORK ( TheStreet) -- As the U.S. housing recovery steadily became more noticeable in the past couple of years, investors in leading tool company Stanley Black & Decker (SWK - Get Report) have grown increasingly frustrated at the company's underperformance. And it's been for good reason.

Unlike, say, home improvement retailers Lowe's (LOW) and Home Depot (HD), or even lumber manufacturer Louisiana Pacific (LPX), which have all found shelter in housing, Stanley has wallowed in low margins and an over-leveraged balance sheet.

Making matters worse was commercial construction activity also taking a turn for the worse. It's true Stanley hasn't been alone in its suffering. Rivals like Snap-On (SNA) have also taken their lumps. Even so, unlike Snap-On or a large industrial tool company like Illinois Tool Works (ITW), Stanley's management shot themselves in the foot by selling off some housing-related assets. And in the October quarter, these moves came home to roost.

Stanley stock plummeted as much as 16%. It was not because the October quarter was bad; rather, because investors realized that Stanley was not as closely tied to the housing recovery as initially believed (at least not to the extent of a company like Mohawk Industries (MHK)).

In October, upon issuing guidance for the fourth-quarter that is due out Friday, management cited projected weak organic growth on (among other things) the government shutdown. By revealing margin compression within the Security segment due to weakening emerging markets, the company spooked investors even more. And it didn't stop there.

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