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Snap-on's (SNA) Q1 Earnings Miss Estimates, Sales Down Y/Y
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Snap-on Incorporated (SNA - Free Report) posted lower-than-expected first-quarter 2020 results. The top and bottom lines decreased year over year. Results were affected by the tough economic environment and unprecedented COVID-19 impacts. Also, lower sales volume in most of the regions and segments hurt quarterly results.
In the past three months, shares of this Zacks Rank #3 (Hold) company have lost 31.6% compared with the industry's 27.7% decline.
Q1 in Details
Snap-on’s adjusted earnings of $2.60 per share in first-quarter 2020 missed the Zacks Consensus Estimate of $2.75. Moreover, the figure was down 13.6% from the year-ago quarter’s adjusted earnings of $3.01 per share.
Net sales declined 7.5% to $852.2 million and lagged the Zacks Consensus Estimate of $879 million. The downside can be attributed to soft organic sales to the tune of 6.9% and a $10.3-million adverse impact from foreign currency translations. However, the growth was offset by $3.5 million in contributions from acquisitions.
Further, the company’s adjusted operating earnings before financial services totaled $146.4 million, down 16.7% from $175.8 million in the prior-year quarter.
Adjusted operating earnings of $203.3 million were down 14.5% from the prior-year quarter. Additionally, adjusted operating earnings margin contracted 190 basis points to 21.7%.
Snap-On Incorporated Price, Consensus and EPS Surprise
Sales at Commercial & Industrial Group fell 7% from the prior-year quarter to $299.9 million due to organic sales decline of 5.7% and currency headwinds of $5.3 million. This was somewhat offset by $0.7-million gains from acquisitions. Sluggishness in Asia-Pacific operations and the Europe-based hand tools business hurt sales in this segment, which was partly offset by higher sales in the power tools division.
The Tools Group segment’s sales fell 8.4% year over year to $375.9 million due to a 7.8% decline in organic sales and a $2.5 million impact of currency headwinds. Organic sales were hurt by soft sales in the United States and international franchise operations.
Sales at Repair Systems & Information Group declined 4.1% year over year to $314.6 million. Moreover, organic sales at the segment dipped 4% from the year-ago quarter owing to lower sales to OEM dealerships and softness in undercar equipment, offset by higher sales of diagnostics and repair information products to independent repair shop owners and managers. Further, unfavorable currency rates hurt the top line to the tune of $3.2 million. However, sales of $2.8 million from buyouts aided growth.
Nevertheless, the Financial Services business reported revenues of $85.9 million, up from $85.6 million in the year-ago quarter.
Financials
During the quarter, Snap-on’s cash and cash equivalents totaled $185.8 million compared with $184.5 million, as of Dec 28, 2019.
Looking Ahead
Given the coronavirus pandemic, which has led to supply-chain disruptions, Snap-on anticipates sales and earnings to be lower year over year during second-quarter 2020. Further, it is making efforts, including cost-cutting initiatives and the Rapid Continuous Improvement (RCI) plan in a bid to combat the uncertain COVID-19 impacts.
Also, the company foresees capital expenditure for 2020 to be $70-$80 million, out of which $17.2 million has been incurred in the reported quarter. Moving ahead, it still projects effective income tax rate for 2020 in the range of 23-24%.
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Netflix (NFLX - Free Report) has an expected long-term earnings growth rate of 30% and a Zacks Rank #2, at present.
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Snap-on's (SNA) Q1 Earnings Miss Estimates, Sales Down Y/Y
Snap-on Incorporated (SNA - Free Report) posted lower-than-expected first-quarter 2020 results. The top and bottom lines decreased year over year. Results were affected by the tough economic environment and unprecedented COVID-19 impacts. Also, lower sales volume in most of the regions and segments hurt quarterly results.
In the past three months, shares of this Zacks Rank #3 (Hold) company have lost 31.6% compared with the industry's 27.7% decline.
Q1 in Details
Snap-on’s adjusted earnings of $2.60 per share in first-quarter 2020 missed the Zacks Consensus Estimate of $2.75. Moreover, the figure was down 13.6% from the year-ago quarter’s adjusted earnings of $3.01 per share.
Net sales declined 7.5% to $852.2 million and lagged the Zacks Consensus Estimate of $879 million. The downside can be attributed to soft organic sales to the tune of 6.9% and a $10.3-million adverse impact from foreign currency translations. However, the growth was offset by $3.5 million in contributions from acquisitions.
Further, the company’s adjusted operating earnings before financial services totaled $146.4 million, down 16.7% from $175.8 million in the prior-year quarter.
Adjusted operating earnings of $203.3 million were down 14.5% from the prior-year quarter. Additionally, adjusted operating earnings margin contracted 190 basis points to 21.7%.
Snap-On Incorporated Price, Consensus and EPS Surprise
Snap-On Incorporated price-consensus-eps-surprise-chart | Snap-On Incorporated Quote
Segmental Details
Sales at Commercial & Industrial Group fell 7% from the prior-year quarter to $299.9 million due to organic sales decline of 5.7% and currency headwinds of $5.3 million. This was somewhat offset by $0.7-million gains from acquisitions. Sluggishness in Asia-Pacific operations and the Europe-based hand tools business hurt sales in this segment, which was partly offset by higher sales in the power tools division.
The Tools Group segment’s sales fell 8.4% year over year to $375.9 million due to a 7.8% decline in organic sales and a $2.5 million impact of currency headwinds. Organic sales were hurt by soft sales in the United States and international franchise operations.
Sales at Repair Systems & Information Group declined 4.1% year over year to $314.6 million. Moreover, organic sales at the segment dipped 4% from the year-ago quarter owing to lower sales to OEM dealerships and softness in undercar equipment, offset by higher sales of diagnostics and repair information products to independent repair shop owners and managers. Further, unfavorable currency rates hurt the top line to the tune of $3.2 million. However, sales of $2.8 million from buyouts aided growth.
Nevertheless, the Financial Services business reported revenues of $85.9 million, up from $85.6 million in the year-ago quarter.
Financials
During the quarter, Snap-on’s cash and cash equivalents totaled $185.8 million compared with $184.5 million, as of Dec 28, 2019.
Looking Ahead
Given the coronavirus pandemic, which has led to supply-chain disruptions, Snap-on anticipates sales and earnings to be lower year over year during second-quarter 2020. Further, it is making efforts, including cost-cutting initiatives and the Rapid Continuous Improvement (RCI) plan in a bid to combat the uncertain COVID-19 impacts.
Also, the company foresees capital expenditure for 2020 to be $70-$80 million, out of which $17.2 million has been incurred in the reported quarter. Moving ahead, it still projects effective income tax rate for 2020 in the range of 23-24%.
3 Better-Ranked Consumer Discretionary Stocks
The Toro Company (TTC - Free Report) has an impressive long-term earnings growth rate of 10%. Currently, it holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Central Garden & Pet Company (CENT - Free Report) has an impressive long-term earnings growth rate of 5.9% and a Zacks Rank #2.
Netflix (NFLX - Free Report) has an expected long-term earnings growth rate of 30% and a Zacks Rank #2, at present.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
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