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Why Snap-On (SNA) Could Be a Great Addition to Your Portfolio
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Snap-On Incorporated (SNA - Free Report) is a good investment option right now due to continued positive business momentum and contributions from its Value Creation plan.
The Zacks Consensus Estimate for Snap-On's 2023 and 2024 earnings has moved up 0.6%, respectively, over the past 60 days. This shows that analysts are optimistic regarding the company’s growth prospects.
In the past three months, shares of this Zacks Rank #2 (Buy) company have jumped 16.8% compared with the industry's growth of 4.3%.
Image Source: Zacks Investment Research
Let’s look at a few factors that make the SNA stock a rewarding investment pick now.
Things to Note
Snap-On’s robust business model helps enhance value-creation processes, which improve 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.
Moreover, 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, alongside helping Snap-On boost sales and margins and generate savings.
Savings from the RCI initiative reflect gains from continuous productivity and process improvement plans. Management intends to boost customer services along with enhancing manufacturing and supply-chain capabilities through the RCI initiative and further investments. Moreover, Snap-On’s ability to innovate bodes well. The company has been investing in new products and increasing brand awareness worldwide.
Management remains focused on leveraging capabilities in the automotive repair space and expanding the customer base, particularly in the automotive repair and critical industries.
Driven by these factors, the company continued its robust surprise trend in the first quarter of 2023. The top and bottom lines beat the Zacks Consensus Estimate, marking the 11th straight earnings beat and the 12th consecutive sales surprise. Earnings and sales improved year over year.
Snap-On’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%.
In the first quarter, Snap-On’s 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. SNA’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%.
Headwinds to Overcome
Despite these upsides, Snap-On is not free from struggles. It 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 is likely to remain a deterrent.
The unfavorable currency also remains concerning. In the first quarter of 2023, the company’s sales were affected by an unfavorable foreign currency of $24 million. Sales in the Commercial & Industrial Group, Tools Group and Repair Systems & Information Group segments included $12.5 million, $7.1 million and $6 million of unfavorable foreign currency, respectively.
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. Topping it, the long-term earnings growth rate of 7% reflects its inherent strength.
Other Stocks to Consider
Some other top-ranked companies are Bluegreen Vacations , Royal Caribbean (RCL - Free Report) and lululemon athletica (LULU - Free Report) .
The Zacks Consensus Estimate for Bluegreen Vacations’ 2023 sales and EPS indicates increases of 3.6% and 17.6%, respectively, from the year-ago reported levels.
Royal Caribbean sports a Zacks Rank #1 at present. RCL has a trailing four-quarter earnings surprise of 26.4%, on average.
The Zacks Consensus Estimate for Royal Caribbean’s 2023 sales and EPS indicates increases of 47.9% and 158.3%, respectively, from the year-ago period’s reported levels.
lululemon athletica is a yoga-inspired athletic apparel company. LULU carries a Zacks Rank of 2 (Buy) at present.
The Zacks Consensus Estimate for lululemon athletica’s current financial-year sales and EPS suggests growth of 16.7% and 18%, respectively, from the year-ago reported figures. LULU has a trailing four-quarter earnings surprise of 9.9%, on average.
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Why Snap-On (SNA) Could Be a Great Addition to Your Portfolio
Snap-On Incorporated (SNA - Free Report) is a good investment option right now due to continued positive business momentum and contributions from its Value Creation plan.
The Zacks Consensus Estimate for Snap-On's 2023 and 2024 earnings has moved up 0.6%, respectively, over the past 60 days. This shows that analysts are optimistic regarding the company’s growth prospects.
In the past three months, shares of this Zacks Rank #2 (Buy) company have jumped 16.8% compared with the industry's growth of 4.3%.
Image Source: Zacks Investment Research
Let’s look at a few factors that make the SNA stock a rewarding investment pick now.
Things to Note
Snap-On’s robust business model helps enhance value-creation processes, which improve 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.
Moreover, 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, alongside helping Snap-On boost sales and margins and generate savings.
Savings from the RCI initiative reflect gains from continuous productivity and process improvement plans. Management intends to boost customer services along with enhancing manufacturing and supply-chain capabilities through the RCI initiative and further investments. Moreover, Snap-On’s ability to innovate bodes well. The company has been investing in new products and increasing brand awareness worldwide.
Management remains focused on leveraging capabilities in the automotive repair space and expanding the customer base, particularly in the automotive repair and critical industries.
Driven by these factors, the company continued its robust surprise trend in the first quarter of 2023. The top and bottom lines beat the Zacks Consensus Estimate, marking the 11th straight earnings beat and the 12th consecutive sales surprise. Earnings and sales improved year over year.
Snap-On’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%.
In the first quarter, Snap-On’s 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. SNA’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%.
Headwinds to Overcome
Despite these upsides, Snap-On is not free from struggles. It 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 is likely to remain a deterrent.
The unfavorable currency also remains concerning. In the first quarter of 2023, the company’s sales were affected by an unfavorable foreign currency of $24 million. Sales in the Commercial & Industrial Group, Tools Group and Repair Systems & Information Group segments included $12.5 million, $7.1 million and $6 million of unfavorable foreign currency, respectively.
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. Topping it, the long-term earnings growth rate of 7% reflects its inherent strength.
Other Stocks to Consider
Some other top-ranked companies are Bluegreen Vacations , Royal Caribbean (RCL - Free Report) and lululemon athletica (LULU - Free Report) .
Bluegreen Vacations sports a Zacks Rank #1 (Strong Buy) at present. BVH has a trailing four-quarter earnings surprise of 24.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Bluegreen Vacations’ 2023 sales and EPS indicates increases of 3.6% and 17.6%, respectively, from the year-ago reported levels.
Royal Caribbean sports a Zacks Rank #1 at present. RCL has a trailing four-quarter earnings surprise of 26.4%, on average.
The Zacks Consensus Estimate for Royal Caribbean’s 2023 sales and EPS indicates increases of 47.9% and 158.3%, respectively, from the year-ago period’s reported levels.
lululemon athletica is a yoga-inspired athletic apparel company. LULU carries a Zacks Rank of 2 (Buy) at present.
The Zacks Consensus Estimate for lululemon athletica’s current financial-year sales and EPS suggests growth of 16.7% and 18%, respectively, from the year-ago reported figures. LULU has a trailing four-quarter earnings surprise of 9.9%, on average.