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Snap-on's (SNA) Q2 Earnings Miss Estimates, Sales Beat

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Snap-on Incorporated (SNA - Free Report) posted second-quarter 2020 results, wherein the bottom line lagged the Zacks Consensus Estimate while sales surpassed the same. Further, the top and bottom lines decreased year over year. Results were affected by the tough economic environment and unprecedented COVID-19 impacts. From April to May and June, this Zacks Rank #4 (Sell) company witnessed a declining sales trend.

Q2 in Details

Snap-on’s adjusted earnings of $1.91 per share in second-quarter 2020 missed the Zacks Consensus Estimate of $1.94. Moreover, the figure was down 40.7% from the year-ago quarter’s adjusted earnings of $3.22 per share.

Net sales declined 23.9% to $724.3 million and beat the Zacks Consensus Estimate of $708 million. The downside can be attributed to soft organic sales to the tune of 22.9% and a $14.4-million adverse impact from foreign currency translations. However, the growth was offset by $2.3 million in contributions from acquisitions.

Further, the company’s adjusted operating earnings before financial services totaled $95.1 million, down 49.9% year over year.

Adjusted operating earnings of $152.7 million were down 39% from the prior-year quarter. Additionally, adjusted operating earnings margin contracted significantly to 18.9%  in the quarter under review.

SnapOn Incorporated Price, Consensus and EPS Surprise

Segmental Details

Sales at Commercial & Industrial Group fell 21.8% from the prior-year quarter to $261.9 million due to an organic sales decline of 20.2% and currency headwinds of $6.9 million. This was somewhat offset by $0.7-million gains from acquisitions. Sales decline in critical industries and the power tools operation to the tune of mid-teens hurt the segment.

The Tools Group segment’s sales fell 20.3% year over year to $323.3 million due to a 19.7% decline in organic sales and a $3.3-million impact of currency headwinds. Organic sales were hurt as sales in the United States fell by mid-teens and in international franchise operations by 40%.

Sales at Repair Systems & Information Group declined 29.8% year over year to $245 million. Moreover, organic sales at the segment dropped 29.5% from the year-ago quarter due to lower sales to OEM dealerships and softness in undercar equipment to the tune of more than 30% along with sales decline of mid-teen digit in diagnostics and repair information products to independent repair shop owners and managers. Further, unfavorable currency rates hurt the top line to the tune of $4.8 million. However, sales of $2.3 million from buyouts aided growth.

Nevertheless, the Financial Services business reported revenues of $57.6 million, down from $84.6 million in the year-ago quarter.

Financials

During the quarter, Snap-on’s cash and cash equivalents totaled $686.2 million compared with $184.5 million as of Dec 28, 2019.

Looking Ahead

Given the tough retail environment stemming from the ongoing COVID-19 outbreak, Snap-on has witnessed improving trends in the second quarter, which is likely to continue in the near term. Further, the company is increasing focus on its Rapid Continuous Improvement (RCI) plan and other cost-cutting efforts in a bid to stay afloat amid this crisis. Owing to this, it incurred expenses of $4 million in the second quarter. Apart from these, capital expenditure is estimated to be $75-$85 million for 2020. Out of this, $29 million has been incurred in the first half of 2020.

Price Performance

In the past three months, shares of this company have gained 17.2% compared with the industry's 15.4% growth.

Stocks to Consider

Crocs (CROX - Free Report) has a long-term earnings growth rate of 15% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Whirlpool Corporation (WHR - Free Report) has a long-term earnings growth rate of 16.65%. Currently, it carries a Zacks Rank #1.

Sony Corporation (SNE - Free Report) , a Zacks Rank #2 (Buy) stock, has a long-term earnings growth rate of 5.8%.

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