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Snap-on's (SNA) Earnings & Sales Surpass Estimates in Q1

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Snap-on Incorporated (SNA - Free Report) posted solid first-quarter 2021 results, wherein both top and bottom lines increased year over year. Strength in Snap-on Tools Group aided quarterly results. Also, the company successfully concluded the buyout of Dealer-FX Group, Inc. in a bid to expand its technological capabilities and strengthen its foothold in the dealership service and repair operations space. Further, management remains on track with its Rapid Continuous Improvement (RCI) process and other cost-reduction initiatives.

In the past three months, shares of this Zacks Rank #2 (Buy) company have gained 33% compared with the industry's 24.2% growth.

Q1 in Detail

Snap-on’s adjusted earnings of $3.50 per share in first-quarter 2021 surpassed the Zacks Consensus Estimate of $3.01. Moreover, the figure was up 34.6% from the year-ago quarter’s adjusted earnings of $2.60 per share.

Net sales grew 20.2% to $1,024.6 million and beat the Zacks Consensus Estimate of $927 million. The uptick can be attributed to organic sales growth of 16.3%, a $19.2 million positive impact of foreign currency translations and $11.3 million in contributions from acquisitions.

Adjusted gross profit was $513.6 million, up 21.8% year over year, while gross margin advanced 60 basis points (bps) to 50% in the reported quarter.

Further, the company’s adjusted operating earnings before financial services totaled $200.9 million, up 37% year over year. Additionally, the adjusted operating earnings margin expanded 240 bps to 19.6% in the quarter under review.

Segmental Details

Sales in Commercial & Industrial Group increased 15.2% from the prior-year quarter to $345.7 million, driven by organic sales growth of 9.5%, a positive impact of $9.2 million from foreign currency and $7.3 million in gains from acquisitions. Solid sales in the Europe-based hand tools business and the Asia Pacific region acted as upsides.

The Tools Group segment’s sales rose 27.2% year over year to $478.3 million, driven by organic sales growth of 25% and a $6.7-million positive impact of foreign currency. Solid sales performance for both U.S. and international operations aided results.

Sales in Repair Systems & Information Group grew 10.5% year over year to $347.6 million. Moreover, organic sales in the segment rose 7.6% from the year-ago quarter, with a $4.8-million positive impact from foreign currency and $4 million in gains from acquisitions. Higher sales in OEM dealerships, strength in diagnostics and repair information products to independent repair shop owners and a rise in volumes of undercar equipment contributed to segment growth.

Also, the Financial Services business reported revenues of $88.6 million, up from $85.9 million in the year-ago quarter.

Financials

During the quarter, Snap-on’s cash and cash equivalents totaled $904.6 million, with long-term debt of $1,182.3 million and $3,897.9 million in shareholder’s equity.

Looking Ahead

As the world continues to adjust to the changing economic landscape, Snap-on remains optimistic about the ongoing advancement related to the COVID-19 situation in the near term. Further, management remains focused on leveraging capabilities in the automotive repair space and expanding the customer base, particularly in automotive repair and critical industries. As a result, capital expenditures for 2021 is projected to be $90-$100 million, out of which $19.3 million is likely to be incurred in the first three months.

SnapOn Incorporated Price, Consensus and EPS Surprise 

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