Snap-on (SNA) Q2 Earnings & Sales Surpass Estimates, Rise Y/Y

Snap-on (SNA) Q2 Earnings & Sales Surpass Estimates, Rise Y/Y

Snap-on Inc. SNA reported second-quarter 2023 results, wherein both earnings and revenues beat the Zacks Consensus Estimate. Moreover, sales and earnings advanced year over year. Results have benefited from continued positive business momentum and contributions from its Value Creation plan.

Shares of this Zacks Rank #2 (Buy) company have gained 13.7% in the past three months compared with the industry’s 7.5% growth.

Q2 Highlights

Snap-on’s earnings of $4.89 per share in second-quarter 2023 surpassed the Zacks Consensus Estimate of $4.53. The figure also improved by 14.5% from earnings of $4.27 reported in the prior-year quarter.

Net sales grew 4.8% year over year to $1,191.3 million, beating the Zacks Consensus Estimate of $1,184 million. The increase can be attributed to organic sales growth of 5.6%, which can be compared with our estimate of 7.6% growth. This was somewhat offset by an $8.3 million negative impact from foreign currency translations.

The gross profit of $603.7 million improved by 9.1% year over year, while the gross margin expanded by 200 basis points (bps) year over year to 50.7% in the reported quarter. We had expected a gross margin of 50% and a gross margin expansion of 130 bps for the quarter under discussion.

The company’s operating earnings before financial services totaled $277 million, up 12.3% year over year. As a percentage of sales, operating earnings before financial services expanded 160 bps to 23.3% in the second quarter. Financial Services’ operating earnings were $66.9 million in the quarter, up 2.5% year over year.

Consolidated operating earnings (including financial services) were $343.9 million, up 10.3% year over year. As a percentage of sales, operating earnings expanded 130 bps year over year to 26.8%.

Snap-On Incorporated Price, Consensus and EPS Surprise

Snap-On Incorporated Price, Consensus and EPS Surprise

Snap-On Incorporated Price, Consensus and EPS Surprise

Snap-On Incorporated price-consensus-eps-surprise-chart | Snap-On Incorporated Quote

Segmental Details

Sales in Commercial & Industrial Group grew 1.4% from the prior-year quarter to $364.2 million on organic sales growth of 3%. This was partially offset by a negative currency impact of $5.6 million. Organic growth was aided by an increase in activity with customers in critical industries, partially offset by lower power tool volumes. In the quarter, we had expected sales of $368.7 million from the segment.

The Tools Group segment’s sales rose 0.5% year over year to $523.1 million, driven by organic sales growth of 1.1%, partially offset by a $3.2-million negative impact of foreign currency. Robust sales in international operations and the US franchise operations aided organic sales.

Sales in Repair Systems & Information Group advanced 8.4% year over year to $452 million, with organic sales growth of 8.5%. Sales gains were somewhat offset by a $0.3-million negative impact of foreign currency. Strong sales of diagnostics and repair information products to independent repair shop owners and managers and a rise in sales of under-car equipment contributed to segment organic sales growth. Increased activities with OEM dealerships have also aided the segment’s results. Our estimate for sales from this segment was $439.6 million in the quarter.

The Financial Services business’ revenues rose 8.1% year over year to $93.4 million in the quarter. Our estimate for sales from this segment was $87.8 million in the quarter.

Financials

As of Jul 1, 2023, Snap-on’s cash and cash equivalents totaled $871.3 million, with long-term debt of $1,184.2 million and shareholders’ equity (before non-controlling interest) of $4,757.1 million. It incurred $25.8 million in capital expenditures in the quarter under review.

Looking Ahead

Management expects continued progress by leveraging capabilities in the automotive repair arena as well as expanding its customer base in automotive repair and across geographies, including critical industries. As a result, capital expenditure for 2023 is projected to be $100 million. The company anticipates an effective tax rate of 23-24% for 2023.

Other Stocks to Consider

Some other top-ranked companies are G-III Apparel Group, Ltd. GIII, Ralph Lauren RL and Lululemon Athletica Inc. PASS.

G-III Apparel is a leading designer and distributor of women’s and men’s apparel in the United States. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

GIII has a trailing four-quarter earnings surprise of 47.4%, on average. The Zacks Consensus Estimate for its current financial year’s sales and EPS indicates growth of 1.9% and 0.4%, respectively, from the year-ago period’s reported levels. GIII has a trailing four-quarter earnings surprise of 47.4%, on average.

Ralph Lauren, a footwear and accessories dealer, has a Zacks Rank #2 at present. The Zacks Consensus Estimate for Ralph Lauren’s current financial year’s sales and EPS suggests growth of 2.8% and 13.1%, respectively, from the year-ago reported figures. RL has a trailing four-quarter earnings surprise of 17.4%, on average.

Lululemon Athletica is a retailer of athletic apparel, footwear and accessories for women and men. The Zacks Consensus Estimate for LULU’s current financial-year sales and earnings per share suggests growth of 17.1% and 18.4%, respectively, from the corresponding year-ago reported figures. The company has a trailing four-quarter earnings surprise of 9.9%, on average.

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Snap-On Incorporated (SNA): Free Stock Analysis Report

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