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Snap-On (SNA) Earnings Beat Streak Continues in Q1, Sales Up
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Snap-on Incorporated (SNA - Free Report) maintained its impressive earnings beat streak for the tenth straight quarter, as the company posted first-quarter 2018 net earnings of $2.79 per share, which surpassed the Zacks Consensus Estimate of $2.73 by 2.2%. The figure also improved 16.7% from the year-ago quarter’s tally.
The bottom line benefited from Snap-on’s robust business model and focus on value-creation processes. Also, strong contribution from acquisitions proved conducive to the earnings performance.
Inside the Headlines
Net sales in the quarter increased 5.5% year over year to $935.5 million and trumped the Zacks Consensus Estimate of $931 million by a whisker, despite persistent headwinds in the Snap-on Tools Group. Excluding acquisition-related sales and unfavorable foreign currency-translation effect, organic sales inched up 0.8% year over year.
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 improved 11% to $331.6 million. Organic sales were up 1.9%. Higher sales to customers in critical industries along with strong European-based hand tools business drove the top line in this segment. Growth in Asia/Pacific operations contributed to growth, which was somewhat offset by weak sales of power tools.
Snap-on’s Tools Group revenues continued to show weakness, descending 1.1% year over year to $404.7 million. Organic sales at the segment contracted 2.7%, which was somewhat offset by favorable foreign currency-translation impact of $6.7 million. Tepid sales in the company’s U.S. franchise operations continued to drag the segment’s growth.
Repair Systems & Information continued to display strength, as revenues climbed 5.7% year over year to $337 million. Meanwhile, organic sales in the segment improved 2.6%. Higher sales of diagnostics and repair information products to independent repair shop owners and managers as well as OEM dealerships drove strong organic growth in the segment.
Meanwhile, the Financial Services business reported revenues of $83 million compared with $76.8 million recorded in the year-ago quarter.
Operating earnings before financial services in the quarter came in at $177.7 million, up 4.4% from $170.2 million in the prior-year quarter.
Snap-On Incorporated Price, Consensus and EPS Surprise
At the end of the reported quarter, Snap-on’s cash and cash equivalents totaled $97.5 million compared with $92 million at the end of 2017. The company’s long-term debt came in at $946.3 million at quarter end, up from $753.6 million recorded at the end of 2017.
Also, Snap-on expects capital expenditures in the range of $90-$100 million for 2018, of which $18 million was incurred in the first quarter.
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 enjoys a robust foothold in critical industries like power generation, oil and gas, mining as well as railroad. Norbar will enhance and expand Snap-on’s existing torque portfolio and enable it to cater to critical industries, particularly in powered torque products.
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 projects the 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 that the strategic buyout will improve its critical mechanical performance by addressing critical torque requirements.
To Conclude
Despite industry headwinds, Snap-on continues to perform impressively. The company’s overarching business model, which aims to maximize value creation by focusing on areas like safety, quality of service, customer satisfaction and innovation, has emerged as a tried and tested growth driver. Snap-on is committed to its rapid continuous improvement (RCI) program, designed to enhance organizational effectiveness and minimize costs.
Solid prospects across business segments, accretive acquisitions and impressive traction of the recently-launched products continue to add to the company’s strength.
Nevertheless, in recent times, oil market sluggishness and currency fluctuations have been eroding the profitability of this Zacks Rank #4 (Sell) company. Further, persistent contraction in capital expenditure by auto dealers and intense used-car asset quality pressure are formidable headwinds. These factors are substantial risks for Snap-On in the times to come.
Roper Technologies has a solid earnings surprise history for the trailing four quarters, having beaten estimates each time for an average of 3.1%.
Manitex International also has a decent earnings surprise history, with an average beat of 137.5% over the last four quarters, beating estimates twice.
Kadant has generated an impressive average earnings surprise 18.9% for the same time frame, beating estimates all through.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
Snap-On (SNA) Earnings Beat Streak Continues in Q1, Sales Up
Snap-on Incorporated (SNA - Free Report) maintained its impressive earnings beat streak for the tenth straight quarter, as the company posted first-quarter 2018 net earnings of $2.79 per share, which surpassed the Zacks Consensus Estimate of $2.73 by 2.2%. The figure also improved 16.7% from the year-ago quarter’s tally.
The bottom line benefited from Snap-on’s robust business model and focus on value-creation processes. Also, strong contribution from acquisitions proved conducive to the earnings performance.
Inside the Headlines
Net sales in the quarter increased 5.5% year over year to $935.5 million and trumped the Zacks Consensus Estimate of $931 million by a whisker, despite persistent headwinds in the Snap-on Tools Group. Excluding acquisition-related sales and unfavorable foreign currency-translation effect, organic sales inched up 0.8% year over year.
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 improved 11% to $331.6 million. Organic sales were up 1.9%. Higher sales to customers in critical industries along with strong European-based hand tools business drove the top line in this segment. Growth in Asia/Pacific operations contributed to growth, which was somewhat offset by weak sales of power tools.
Snap-on’s Tools Group revenues continued to show weakness, descending 1.1% year over year to $404.7 million. Organic sales at the segment contracted 2.7%, which was somewhat offset by favorable foreign currency-translation impact of $6.7 million. Tepid sales in the company’s U.S. franchise operations continued to drag the segment’s growth.
Repair Systems & Information continued to display strength, as revenues climbed 5.7% year over year to $337 million. Meanwhile, organic sales in the segment improved 2.6%. Higher sales of diagnostics and repair information products to independent repair shop owners and managers as well as OEM dealerships drove strong organic growth in the segment.
Meanwhile, the Financial Services business reported revenues of $83 million compared with $76.8 million recorded in the year-ago quarter.
Operating earnings before financial services in the quarter came in at $177.7 million, up 4.4% from $170.2 million in the prior-year quarter.
Snap-On Incorporated Price, Consensus and EPS Surprise
Snap-On Incorporated Price, Consensus and EPS Surprise | Snap-On Incorporated Quote
Liquidity
At the end of the reported quarter, Snap-on’s cash and cash equivalents totaled $97.5 million compared with $92 million at the end of 2017. The company’s long-term debt came in at $946.3 million at quarter end, up from $753.6 million recorded at the end of 2017.
Also, Snap-on expects capital expenditures in the range of $90-$100 million for 2018, of which $18 million was incurred in the first quarter.
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 enjoys a robust foothold in critical industries like power generation, oil and gas, mining as well as railroad. Norbar will enhance and expand Snap-on’s existing torque portfolio and enable it to cater to critical industries, particularly in powered torque products.
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 projects the 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 that the strategic buyout will improve its critical mechanical performance by addressing critical torque requirements.
To Conclude
Despite industry headwinds, Snap-on continues to perform impressively. The company’s overarching business model, which aims to maximize value creation by focusing on areas like safety, quality of service, customer satisfaction and innovation, has emerged as a tried and tested growth driver. Snap-on is committed to its rapid continuous improvement (RCI) program, designed to enhance organizational effectiveness and minimize costs.
Solid prospects across business segments, accretive acquisitions and impressive traction of the recently-launched products continue to add to the company’s strength.
Nevertheless, in recent times, oil market sluggishness and currency fluctuations have been eroding the profitability of this Zacks Rank #4 (Sell) company. Further, persistent contraction in capital expenditure by auto dealers and intense used-car asset quality pressure are formidable headwinds. These factors are substantial risks for Snap-On in the times to come.
Stocks to Consider
Better-ranked stocks in the broader space include Roper Technologies, Inc. (ROP - Free Report) , Kadant Inc (KAI - Free Report) and Manitex International, Inc. (MNTX - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Roper Technologies has a solid earnings surprise history for the trailing four quarters, having beaten estimates each time for an average of 3.1%.
Manitex International also has a decent earnings surprise history, with an average beat of 137.5% over the last four quarters, beating estimates twice.
Kadant has generated an impressive average earnings surprise 18.9% for the same time frame, beating estimates all through.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>