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Snap-on (SNA) Stock Gains More Than 14% YTD: Here's Why

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Snap-on (SNA - Free Report) has been gaining from a positive business momentum and contributions from its Value Creation plan. This led to a robust surprise trend, which continued in first-quarter 2023. The top and the bottom lines beat the Zacks Consensus Estimate, marking the 11th straight earnings beat and the 12th consecutive sales surprise.

The company’s earnings of $4.6 per share improved 15% from earnings of $4 reported in the prior-year quarter. Net sales grew 7.8% year over year to $1,183 million, driven by organic sales growth of 10.2%.

Its first-quarter gross profit of $589.6 million improved 10.3% year over year, whereas the gross margin expanded 110 basis points (bps) year over year to 49.8% in the reported quarter. The company’s operating earnings before financial services totaled $259.8 million, up 16.5% year over year. As a percentage of sales, operating earnings before financial services expanded 170 bps to 22% in the first quarter. Consolidated operating earnings (including financial services) were $326.1 million, up 11% year over year. As a percentage of sales, operating earnings expanded 80 bps year over year to 25.6%.

SNA’s robust business model helps enhance 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 dedicated to various strategic principles and processes aimed at creating value in areas like RCI. The RCI process is designed to enhance organizational effectiveness and minimize costs, beside helping Snap-on 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. Snap-on’s ability to innovate bodes well. The company has been investing in new products and increasing brand awareness across the world.

Driven by these factors, shares of this Zacks Rank #2 (Buy) company have gained 14.9% in the year-to-date period compared with the industry’s growth of 3.4%.


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However, Snap-on continues to reel under macroeconomic headwinds, which are likely to persist in 2023. Rising cost inflation, stemming from higher raw material expenses and other costs, acts as a deterrent. Unfavorable currency is concerning.

Bottom Line

All said, Snap-on’s cost-cutting efforts, RCI plan and solid business momentum are likely to help sustain its momentum, and offset inflation and currency woes.

Snap-on’s earnings estimate for the current financial year rose 3.2% in the past 30 days. Topping it, a VGM Score of B and a long-term earnings growth rate of 7% reflect its inherent strength.

Other Stocks to Consider

Some other top-ranked companies are Crocs (CROX - Free Report) , PVH Corp (PVH - Free Report) and H&R Block (HRB - Free Report) .

Crocs, which offers casual lifestyle footwear and accessories, carries a Zacks Rank #2. The expected EPS growth rate for three to five years is 15%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Crocs’ current financial-year sales and earnings suggests growth of 13.1% and 2.8% from the year-ago period’s reported figures. CROX has a trailing four-quarter earnings surprise of 21.8%, on average.

PVH Corp currently carries a Zacks Rank #2. PVH has a trailing four-quarter earnings surprise of 23.4%, on average. PVH has a long-term earnings growth rate of 16.1%.

The Zacks Consensus Estimate for PVH Corp’s current financial year’s sales and EPS indicates declines of 3.8% and 9.8%, respectively, from the year-ago period’s reported levels.

H&R Block provides assisted income tax return preparation and do-it-yourself tax return preparation services. HRB currently carries a Zacks Rank #2.

The Zacks Consensus Estimate for H&R Block’s current financial year’s EPS suggests growth of 9.4% from the year-ago reported figure. H&R Block has a trailing four-quarter earnings surprise of 10.7%, on average.   

See More Zacks Research for These Tickers

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Snap-On Incorporated (SNA) - free report >>

H&R Block, Inc. (HRB) - free report >>

PVH Corp. (PVH) - free report >>

Crocs, Inc. (CROX) - free report >>

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