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Snap-On (SNA) Down 4.6% Since Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Snap-On Incorporated (SNA - Free Report) . Shares have lost about 4.6% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is SNA due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Snap-On Q4 Earnings Beat on Robust Top-Line Growth
Snap-on maintained its impressive earnings beat streak for the ninth straight quarter, as the company posted fourth-quarter 2017 net earnings of $2.69 per share, which surpassed the Zacks Consensus Estimate of $2.66 by 1.1%. The figure also reflected an increase of 8.9% from the year-ago tally.
The bottom line benefited from Snap-on’s robust business model and focus on value-creation processes. Also, strong contribution from acquisitions and organic growth proved conducive to the earnings performance.
For the full year, the company reported adjusted earnings of $10.12 per share, up 10% from the previous year’s figure.
Inside the Headlines
Net sales in the quarter increased 9.5% year over year to $974.6 million and trumped the Zacks Consensus Estimate of $941.6 million comfortably. Excluding acquisition-related expenses and unfavorable foreign currency-translation effect, organic sales rose 4.3% year over year. Both the total sales increase and the organic growth for the quarter were the highest in 2017.
For the full year, the company reported a 7.5% increase in sales to $3686.9 million compared to the previous-year tally, with organic sales growing 3.4%.
Solid sales growth at Snap-on Repair Systems & Information and Commercial & Industrial Group drove the top line. However, the company’s U.S. franchise operations in the Tools Group remained subdued.
Segment wise, Commercial & Industrial Group sales rose a striking 19.4% to $341.7 million. Organic sales were up 10.1%. Higher sales to customers in critical industries, along with strong European-based hand tools business, drove the top line at this segment. Also, robust sales of power tools and growth in Asia/Pacific operations contributed to growth.
Snap-on’s Tools Group revenues continued to show weakness, descending 2% year over year to $409.2 million. Organic sales at the segment contracted 3%, which was somewhat offset by favorable foreign currency-translation impact of $4.3 million. Tepid sales in the company’s U.S. franchise operations continued to drag the segment’s growth.
Repair Systems & Information continued to display impressive strength, as revenues climbed 11.6% year over year to $356.8 million. Meanwhile, organic sales at the segment improved 6.2%. Higher sales of diagnostics and repair information products to independent repair shop owners and managers, and OEM dealerships drove strong organic growth at the segment.
On the other hand, the Financial Services business reported revenues of $79.9 million compared with $74.2 million recorded in the year-ago quarter.
Operating earnings before financial services (excluding a legal charge) in the quarter came in at $188.6 million, up 7.1% from $176.1 million in the prior-year quarter.
Liquidity
At the end of the reported quarter, Snap-on’s cash and cash equivalents totaled $92 million compared with $77.6 million at the end of 2016. The company’s long-term debt came in at $753.6 million at quarter end, up from $708.8 million recorded at the end of 2016.
Acquisitions
In second-quarter 2017, Snap-on acquired Norbar Torque Tools, along with its U.S. and Chinese joint ventures, for roughly $72 million. Norbar is a leading European manufacturer which boasts a complete range of torque products and also enjoys a robust foothold in critical industries, like power generation, oil & gas, mining and railroad. Norbar will complement and expand Snap-on’s existing torque portfolio, and help it cater to critical industries, particularly in powered torque products.
Earlier, in fourth-quarter 2016, Snap-on purchased Sweden-based firm — Car-O-Liner — to reinforce the Repair Systems & Information Group’s position, and fortify its hold in the auto and heavy duty markets. The company anticipates this acquisition and favorable industry trends to strengthen its relationship with repair-shop owners and managers.
Snap-on also acquired torque wrench marker — Sturtevant Richmont — which is engaged in the designing, manufacturing, and distributing of mechanical and electronic torque wrenches. Snap-on believes this strategic buyout will improve its critical mechanical performance by addressing critical torque requirements.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been four revisions higher for the current quarter compared to one lower. In the past month, the consensus estimate has shifted by 5.4% due to these changes.
At this time, SNA has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for value investors than those looking for growth and momentum.
Outlook
Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise SNA has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Snap-On (SNA) Down 4.6% Since Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Snap-On Incorporated (SNA - Free Report) . Shares have lost about 4.6% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is SNA due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Snap-On Q4 Earnings Beat on Robust Top-Line Growth
Snap-on maintained its impressive earnings beat streak for the ninth straight quarter, as the company posted fourth-quarter 2017 net earnings of $2.69 per share, which surpassed the Zacks Consensus Estimate of $2.66 by 1.1%. The figure also reflected an increase of 8.9% from the year-ago tally.
The bottom line benefited from Snap-on’s robust business model and focus on value-creation processes. Also, strong contribution from acquisitions and organic growth proved conducive to the earnings performance.
For the full year, the company reported adjusted earnings of $10.12 per share, up 10% from the previous year’s figure.
Inside the Headlines
Net sales in the quarter increased 9.5% year over year to $974.6 million and trumped the Zacks Consensus Estimate of $941.6 million comfortably. Excluding acquisition-related expenses and unfavorable foreign currency-translation effect, organic sales rose 4.3% year over year. Both the total sales increase and the organic growth for the quarter were the highest in 2017.
For the full year, the company reported a 7.5% increase in sales to $3686.9 million compared to the previous-year tally, with organic sales growing 3.4%.
Solid sales growth at Snap-on Repair Systems & Information and Commercial & Industrial Group drove the top line. However, the company’s U.S. franchise operations in the Tools Group remained subdued.
Segment wise, Commercial & Industrial Group sales rose a striking 19.4% to $341.7 million. Organic sales were up 10.1%. Higher sales to customers in critical industries, along with strong European-based hand tools business, drove the top line at this segment. Also, robust sales of power tools and growth in Asia/Pacific operations contributed to growth.
Snap-on’s Tools Group revenues continued to show weakness, descending 2% year over year to $409.2 million. Organic sales at the segment contracted 3%, which was somewhat offset by favorable foreign currency-translation impact of $4.3 million. Tepid sales in the company’s U.S. franchise operations continued to drag the segment’s growth.
Repair Systems & Information continued to display impressive strength, as revenues climbed 11.6% year over year to $356.8 million. Meanwhile, organic sales at the segment improved 6.2%. Higher sales of diagnostics and repair information products to independent repair shop owners and managers, and OEM dealerships drove strong organic growth at the segment.
On the other hand, the Financial Services business reported revenues of $79.9 million compared with $74.2 million recorded in the year-ago quarter.
Operating earnings before financial services (excluding a legal charge) in the quarter came in at $188.6 million, up 7.1% from $176.1 million in the prior-year quarter.
Liquidity
At the end of the reported quarter, Snap-on’s cash and cash equivalents totaled $92 million compared with $77.6 million at the end of 2016. The company’s long-term debt came in at $753.6 million at quarter end, up from $708.8 million recorded at the end of 2016.
Acquisitions
In second-quarter 2017, Snap-on acquired Norbar Torque Tools, along with its U.S. and Chinese joint ventures, for roughly $72 million. Norbar is a leading European manufacturer which boasts a complete range of torque products and also enjoys a robust foothold in critical industries, like power generation, oil & gas, mining and railroad. Norbar will complement and expand Snap-on’s existing torque portfolio, and help it cater to critical industries, particularly in powered torque products.
Earlier, in fourth-quarter 2016, Snap-on purchased Sweden-based firm — Car-O-Liner — to reinforce the Repair Systems & Information Group’s position, and fortify its hold in the auto and heavy duty markets. The company anticipates this acquisition and favorable industry trends to strengthen its relationship with repair-shop owners and managers.
Snap-on also acquired torque wrench marker — Sturtevant Richmont — which is engaged in the designing, manufacturing, and distributing of mechanical and electronic torque wrenches. Snap-on believes this strategic buyout will improve its critical mechanical performance by addressing critical torque requirements.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been four revisions higher for the current quarter compared to one lower. In the past month, the consensus estimate has shifted by 5.4% due to these changes.
Snap-On Incorporated Price and Consensus
Snap-On Incorporated Price and Consensus | Snap-On Incorporated Quote
VGM Scores
At this time, SNA has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for value investors than those looking for growth and momentum.
Outlook
Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise SNA has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.