Stanley Black & Decker (NYSE:SWK) gave investors a lot to like on Wednesday. The toolmaker reported third-quarter earnings that blew past estimates, revenue that was largely in line, and a raised full-year outlook. The stock responded by jumping 12.21% to $117.39, a new 52-week high.

The headline numbers: adjusted earnings of $2.31 per share, which included a 67-cent net tariff refund benefit. Wall Street was looking for just $1.56 per share. Revenue slipped 1% year over year to $3.732 billion, essentially matching the $3.741 billion consensus. Organic revenue, which strips out currency and portfolio changes, rose 4% on stronger sales volumes. GAAP earnings climbed 34 cents to $1.83 per share.

Margins Get a Tariff Tailwind

Sales volume rose 6%, while pricing declined 2%. Portfolio changes reduced sales by 4%. Gross margin expanded 760 basis points to 39%, and adjusted gross margin rose 780 basis points to 39.4%. Net tariff refunds contributed about 430 basis points to both margins.

On the earnings call, management said those tariff refunds allowed the company to accelerate investments in marketing, brand building, and personnel. The company expects selling, general and administrative expenses to return to about 23% of sales in 2027 as one-time costs decline.

Tools & Outdoor Does the Heavy Lifting

The Tools & Outdoor segment, which is the company's biggest, saw sales rise 2% to $3.336 billion. Organic revenue increased 4%, driven by power tools and strong demand across U.S. retail, commercial, and industrial channels. Adjusted segment margin expanded 560 basis points to 17.6%, helped by productivity gains and a favorable product mix.

Engineered Fastening was the weak spot. Sales fell 21% to $396 million, mainly due to the CAM divestiture. Organic revenue still managed to rise 2% as industrial demand partly offset weakness in automotive markets. Adjusted segment margin declined 110 basis points to 11.7%.

Price Hikes May Be Coming in 2027

CEO Chris Nelson said the company's promotional strategy helped drive Tools & Outdoor sales volumes without hurting profitability. But he also warned that rising metals and resin costs could prompt price increases in 2027.

"We will be looking to supplement our productivity with price as we come out of the year," Nelson said.

Management also sees opportunities to improve margins by streamlining its global manufacturing operations and increasing capacity utilization.

CFO Patrick Hallinan said inflationary pressures have intensified over the past three months, particularly for steel and electrical components. He warned that the company expects significant cost pressures in 2027, regardless of whether tariffs rise, and could raise prices around the start of the year to offset higher costs.

Cash Flow and Buybacks

Operating cash flow reached $659 million, while free cash flow totaled $585 million. The company repurchased about 2.5 million shares for $250 million during the quarter, completing its previous buyback authorization. The board also approved a new share repurchase program of up to $1 billion.

Guidance Gets a Boost

Stanley Black & Decker raised its 2026 GAAP earnings forecast to $5.45-$5.85 per share from $4.60-$5.45. Wall Street expects $5.65 per share. The company also increased its adjusted earnings forecast to $5.95-$6.25 per share from $5.20-$5.80.

Free cash flow guidance jumped to $1 billion-$1.2 billion, up from the previous forecast of $600 million-$800 million.

For the fourth quarter, management expects revenue of about $3.6 billion, adjusted earnings of roughly $1.45 per share, and adjusted gross margin of 34%-35%.

SWK Price Action: Stanley Black & Decker shares were up 12.21% at $117.39 at the time of publication on Wednesday. The stock is trading at a new 52-week high, according to market data.