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Here's Why Snap-on (SNA) is Marching Ahead of the Industry
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Snap-on Incorporated (SNA - Free Report) has been gaining from its Value Creation model and other cost-reduction initiatives. Backed by progress on these efforts, it delivered impressive second-quarter 2021 results, wherein both top and bottom lines beat the Zacks Consensus Estimate and improved year over year. This marked the fourth straight earnings beat and the fifth consecutive sales surprise.
In the past seven days, the consensus estimate for the company’s 2021 and 2022 earnings per share has moved up by 1.3% and 1.1%, respectively. For 2021, its earnings estimates are pegged at $14.14 per share, suggesting a rise of 21.6% from the year-ago reported figure.
We note that shares of this Zacks Rank #2 (Buy) company have rallied 36% year to date compared with the industry’s growth of 28%.
Image Source: Zacks Investment Research
Its robust business model helps in enhancing value-creation processes, which, in turn, improves safety, quality of service, customer satisfaction and innovation. The company’s growth strategy focuses on three critical areas, namely enhancing the franchise network, improving relationships with repair shop owners and managers, and expanding critical industries in emerging markets.
Snap-on is also progressing well with its Rapid Continuous Improvement (“RCI”) program. The RCI process is designed to enhance organizational effectiveness and minimize costs beside helping it boost sales and margins, and generate savings. Savings from the RCI initiative reflect gains from the continuous productivity and process improvement plans. Management intends to boost customer services along with enhancing manufacturing and supply-chain capabilities through the RCI initiatives and further investments.
The top line grew 13.7% from the second-quarter 2019 reported figure, driven by organic sales growth of 9.3%. Gains from acquisitions of $23 million and positive foreign currency impacts of $17.2 million aided sales. It witnessed improved performances in all three segments. Higher sales volume and gains from its RCI program led to margin expansion, which, in turn, boosted the bottom line. Adjusted earnings grew 16.8% from second-quarter 2019.
Hurdles to Overcome
Snap-on has been witnessing higher direct costs, including labor, temporary factory closures, wages for quarantines associates, event cancellation fees, and health and safety-related expenses. In the second quarter, the company’s operating income before financial services included $4 million of restructuring costs, while gross margin included 30 bps of costs. The bottom line was also affected by the aforementioned headwinds to the tune of $3.3 million. Unfavorable currency remains concerning.
Wrapping Up
We expect the company’s strong top-line trends along with the RCI initiative to offset the pandemic-led cost headwinds and help sustain its positive momentum in the near future. Moreover, a VGM Score of B and a long-term earnings growth rate of 9.5% reflect its inherent strength.
Image: Shutterstock
Here's Why Snap-on (SNA) is Marching Ahead of the Industry
Snap-on Incorporated (SNA - Free Report) has been gaining from its Value Creation model and other cost-reduction initiatives. Backed by progress on these efforts, it delivered impressive second-quarter 2021 results, wherein both top and bottom lines beat the Zacks Consensus Estimate and improved year over year. This marked the fourth straight earnings beat and the fifth consecutive sales surprise.
In the past seven days, the consensus estimate for the company’s 2021 and 2022 earnings per share has moved up by 1.3% and 1.1%, respectively. For 2021, its earnings estimates are pegged at $14.14 per share, suggesting a rise of 21.6% from the year-ago reported figure.
We note that shares of this Zacks Rank #2 (Buy) company have rallied 36% year to date compared with the industry’s growth of 28%.
Image Source: Zacks Investment Research
Its robust business model helps in enhancing value-creation processes, which, in turn, improves safety, quality of service, customer satisfaction and innovation. The company’s growth strategy focuses on three critical areas, namely enhancing the franchise network, improving relationships with repair shop owners and managers, and expanding critical industries in emerging markets.
Snap-on is also progressing well with its Rapid Continuous Improvement (“RCI”) program. The RCI process is designed to enhance organizational effectiveness and minimize costs beside helping it boost sales and margins, and generate savings. Savings from the RCI initiative reflect gains from the continuous productivity and process improvement plans. Management intends to boost customer services along with enhancing manufacturing and supply-chain capabilities through the RCI initiatives and further investments.
The top line grew 13.7% from the second-quarter 2019 reported figure, driven by organic sales growth of 9.3%. Gains from acquisitions of $23 million and positive foreign currency impacts of $17.2 million aided sales. It witnessed improved performances in all three segments. Higher sales volume and gains from its RCI program led to margin expansion, which, in turn, boosted the bottom line. Adjusted earnings grew 16.8% from second-quarter 2019.
Hurdles to Overcome
Snap-on has been witnessing higher direct costs, including labor, temporary factory closures, wages for quarantines associates, event cancellation fees, and health and safety-related expenses. In the second quarter, the company’s operating income before financial services included $4 million of restructuring costs, while gross margin included 30 bps of costs. The bottom line was also affected by the aforementioned headwinds to the tune of $3.3 million. Unfavorable currency remains concerning.
Wrapping Up
We expect the company’s strong top-line trends along with the RCI initiative to offset the pandemic-led cost headwinds and help sustain its positive momentum in the near future. Moreover, a VGM Score of B and a long-term earnings growth rate of 9.5% reflect its inherent strength.
3 Other Stocks to Consider
Crocs (CROX - Free Report) has an impressive long-term earnings growth rate of 15% and it currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Gildan Activewear (GIL - Free Report) has a long-term earnings growth rate of 28%. The company carries a Zacks Rank #2 at present.
Whirlpool Corporation (WHR - Free Report) has a Zacks Rank #2 and a long-term earnings growth rate of 8.1%.