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Snap-on (SNA) Earnings & Sales Beat Estimates in Q1, Rise Y/Y

Shares of Snap-on Inc. SNA grew nearly 1% before the trading session on Apr 20 following better-than-expected top and bottom lines in first-quarter 2023. Moreover, sales and earnings advanced year over year. Results have gained from a continued positive business momentum and contributions from its Value Creation plan despite the tough environment.

Shares of this Zacks Rank #3 (Hold) company have gained 0.4% in the past three months against the industry's 1.6% decline.

Q1 Highlights

Snap-on’s earnings of $4.6 per share in first-quarter 2023 surpassed the Zacks Consensus Estimate of $4.14 and our estimate of $4.01. The figure also improved 15% from earnings of $4 reported in the prior-year quarter.

 

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Zacks Investment Research


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Net sales grew 7.8% year over year to $1,183 million and beat the Zacks Consensus Estimate of $1,150 million and our estimate of $1,123 million. The increase can be attributed to organic sales growth of 10.2%, which surpassed our estimate of 5.5% growth. This was somewhat offset by $24 million of negative impacts of foreign-currency translations.

The gross profit of $589.6 million improved 10.3% year over year, while 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. Financial Services' operating earnings were $66.3 million in the quarter, down 5.8% year over year.

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 at 25.6%.

Segmental Details

Sales in Commercial & Industrial Group grew 7% from the prior-year quarter to $363.8 million on organic sales growth of 11.1%. This was partly offset by a negative currency impact of $12.5 million. Organic growth was aided by higher sales in the segment’s specialty tools business and Europe-based hand tools business, as well as sales growth in critical industries.

The Tools Group segment’s sales rose 4.9% year over year to $537 million, driven by organic sales growth of 6.3%, offset by a $7.1-million negative impact of foreign currency. Robust sales in the U.S. franchise operations aided organic sales.

Sales in Repair Systems & Information Group advanced 12.2% year over year to $446.6 million, with organic sales growth of 13.9%. Sales gains were somewhat offset by a $6-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.

The Financial Services business’ revenues rose 5.6% year over year to $92.6 million in the quarter.

Financials

As of Apr 1, 2023, Snap-on’s cash and cash equivalents totaled $833.8 million, with long-term debt of $1,184 million and shareholders’ equity (before non-controlling interest) of $4,610.2 million. It incurred $23 million of capital expenditure in the quarter under review.

Snap-On Incorporated Price, Consensus and EPS Surprise

 

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

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, the capital expenditure for 2023 is projected to be $100 million. The company anticipates an effective tax rate of 23-24% for 2023.

Stocks to Consider

Some better-ranked companies are Ralph Lauren RL, PVH Corp PVH and H&R Block HRB.

Ralph Lauren, a footwear and accessories dealer, has a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Ralph Lauren’s next financial year’s sales and EPS suggests growth of 5% and 12.8%, respectively, from the year-ago reported figures. RL has a trailing four-quarter earnings surprise of 23.6%, 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.

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

Ralph Lauren Corporation (RL) : Free Stock Analysis Report

H&R Block, Inc. (HRB) : Free Stock Analysis Report

PVH Corp. (PVH) : Free Stock Analysis Report

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