Shares of Snap-on Inc. SNA grew more than 2% before the trading session on Feb 2, following better-than-expected top and bottom lines in fourth-quarter 2022. 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. Management is on track with its Rapid Continuous Improvement process and other cost-reduction initiatives.
Shares of SNA have gained 13.5% in the past three months compared with the industry's 10.7% rally.
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Snap-on’s earnings of $4.42 per share in fourth-quarter 2022 surpassed the Zacks Consensus Estimate of $4.09 and our estimate of $3.94. The figure also improved 7.8% from earnings of $4.10 reported in the prior-year quarter.
Net sales grew 4.3% to $1,155.9 million and beat the Zacks Consensus Estimate of $1,151 million and our estimate of $1,150.1 million. The increase can be attributed to organic sales growth of 8%, which also came ahead of our estimate of 6.1% growth. This was somewhat offset by $37.7 million of negative impacts of foreign-currency translations. Sales and organic sales grew 21% and 22.7%, respectively, from the pre-pandemic levels of 2019.
The gross profit of $560.7 million improved 5.1% year over year, while the gross margin expanded 40 basis points (bps) year over year to 48.5% in the reported quarter.
The company’s operating earnings before financial services totaled $248 million, up 6.8% year over year. As a percentage of sales, operating earnings before financial services expanded 50 bps to 21.5% in the fourth quarter. Financial Services' operating earnings were $63.9 million in the quarter, down 4.9% year over year.
Consolidated operating earnings (including financial services) were $311.9 million, up 4.2% year over year. As a percentage of sales, operating earnings were flat year over year at 25.1%.
Sales in Commercial & Industrial Group declined 4.3% from the prior-year quarter to $343.2 million on a negative currency impact of $21.2 million. This was partly offset by organic sales growth of 1.7%. Organic growth was aided by higher sales in the segment’s specialty tools business and sales growth in critical industries, partly offset by the segment’s Europe-based hand tools business.
The Tools Group segment’s sales rose 7.5% year over year to $542.7 million, driven by organic sales growth of 9.6%, offset by a $9.5-million negative impact of foreign currency. Robust sales in the U.S. and international operations aided organic sales.
Sales in Repair Systems & Information Group advanced 11.6% year over year to $437.9 million, with organic sales growth of 14.3%. Sales gains were somewhat offset by a $9.5-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 also aided the segment’s results.
The Financial Services business’ revenues rose 1.6% year over year to $88.3 million in the quarter.
As of 2022 end, Snap-on’s cash and cash equivalents totaled $757.2 million, with long-term debt of $1,183.8 million and shareholders’ equity (before non-controlling interest) of $4,481.3 million. It incurred $22.7 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
Though this Zacks Rank #3 (Hold) company has shown resilience, 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 in critical industries. As a result, the capital expenditure for 2023 is projected to be $90-$100 million. The company expects an effective tax rate of 23-24% for 2023.
Stocks to Consider
Some better-ranked companies from the Zacks Consumer Discretionary sector are PVH Corp PVH, Oxford Industries OXM and Ralph Lauren RL.
PVH Corp currently carries a Zacks Rank #2 (Buy). PVH has a trailing four-quarter earnings surprise of 22.9%, on average. PVH has a long-term earnings growth rate of 10.2%.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for PVH Corp’s current financial-year sales and EPS indicates declines of 3.1% and 18.6%, respectively, from the year-ago period’s reported levels.
Oxford Industries currently carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 18.9%, on average.
The Zacks Consensus Estimate for Oxford Industries’ current financial-year sales and earnings suggests growth of 23.1% and 34.2% from the year-ago period’s reported numbers, respectively.
Ralph Lauren, a footwear and accessories dealer, has a Zacks Rank of 2 at present. RL has a trailing four-quarter earnings surprise of 28.7%, on average.
The Zacks Consensus Estimate for Ralph Lauren’s next financial-year sales and EPS suggests growth of 5% and 13.4%, respectively, from the year-ago reported figures.
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