Investing.com -- Jefferies initiated coverage on Stanley Black & Decker Inc (NYSE: SWK ) with a 'buy' rating on around 20% upside potential as it highlighted momentum in the Dewalt brand, stabilization of Craftsman, and expected gross margin recapture in 2025 as key drivers of growth.

Jefferies believe the stock's valuation discount to peers should narrow as its narrative shifts from transformation to organic growth in the second half of the year. The firm also expects upward revisions to 2026 earnings estimates as management's margin expansion strategy builds on cost-cutting efforts initiated in 2022.

Jefferies sees Stanley Black & Decker benefiting from an aging U.S. housing stock, which is expected to drive increased homeowner repair and renovation spending in 2025 and 2026. The firm also notes strong demand for Dewalt’s professional-grade tools amid labour shortages, as well as improving trends for Craftsman and Stanley.

The company is projected to deliver approximately 3.3% organic growth in 2025 following flat growth in the prior year. Despite market concerns over gross margins, Jefferies expects mid-single-digit EBITDA growth for 2025 and sees room for further upside as pricing strategies and operational efficiencies take effect.