The Snap-on Incorporated SNA has been gaining from robust organic sales growth and continued positive business momentum. Management remains on track with its Value Creation model. This led to the eighth straight top and the bottom-line beat and the ninth consecutive sales surprise for second-quarter 2022.
Net sales grew 5.1%, driven by organic sales growth of 8.4% year over year. The top line also advanced 19.5% from the second-quarter 2019 figure, driven by organic sales growth of 18.7%. Higher sales and margin expansion boosted the bottom line. Adjusted earnings of $4.27 per share were up 13.6% from $3.76 reported in the prior-year quarter.
Shares of SNA have gained 3.2% year to date against the industry’s decline of 3.9%. It also fared better than the Consumer Discretionary sector's and the S&P 500’s decrease of 33.6% and 17.2%, respectively.
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This presently Zacks Rank #2 (Buy) player remains on track with its Rapid Continuous Improvement (RCI) process and other cost-reduction initiatives. The RCI process is designed to enhance organizational effectiveness and minimize costs besides helping Snap-on boost sales and margins, and generating savings.
Savings from the RCI initiative reflect gains from the continuous productivity and process improvement plans. Management intends to boost customer services, and enhance manufacturing and supply-chain capabilities through the RCI initiatives and further investments.
Moving on, Snap-on’s ability to innovate bodes well. SNA is investing in new products and also increasing brand awareness worldwide.
Its robust business model aids in enhancing value-creation processes, which in turn, improves safety, quality of service, customer satisfaction and innovation. SNA’s growth strategy focuses on three critical areas, namely enhancing the franchise network, improving relationship with repair shop owners and managers, and expanding critical industries in the emerging markets.
Also, a higher sales volume and gains from the RCI initiatives bolstered margins in the second quarter of 2022. SNA’s operating earnings before financial services totaled $246.6 million, up 13.6% year over year. As a percentage of sales, operating earnings before financial services expanded 160 bps to 21.7% in the second quarter. Consolidated operating earnings (including financial services) were $311.9 million, up 9.1% year over year. As a percentage of sales, operating earnings expanded 100 bps to 25.5%.
However, Snap-on continues to reel under potential threats of new COVID-19 variants and supply-chain headwinds, which will likely persist in 2022. Rising cost inflation, stemming from higher raw material expenses and increased transportation costs might remain a deterrent. Also, unfavorable currency movements remain a concern.
Snap-on’s cost-cutting efforts, RCI plan and solid business momentum are likely to rive growth further and offset the aforementioned headwinds. An uptrend in the Zacks Consensus Estimate also echoes a positive sentiment.
The Zacks Consensus Estimate for Snap-on’s 2022 sales and EPS suggests growth of 4.7% and 8.2%, respectively, from the corresponding year-ago reported numbers. Earnings estimates for the current financial year have increased 0.6% to $16.14 over the past 30 days. Topping it, a long-term earnings growth rate of 7.8% implies its inherent strength.
Other Stocks to Consider
Here we highlighted three other top-ranked stocks, namely Designer Brands DBI, Oxford Industries OXM and lululemon athletica LULU.
Designer Brands designs, manufactures, and retails footwear and accessories. The stock currently has a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Designer Brands’ current financial-year revenues and EPS suggests growth of 6.9% and 23.5%, respectively, from the corresponding previous fiscal year’s reported figures. DBI has a trailing four-quarter earnings surprise of 55.1%, on average.
Oxford Industries is a renowned apparel company with a Zacks Rank #2 at present. OXM has a trailing four-quarter earnings surprise of 91.1%, on average.
The Zacks Consensus Estimate for Oxford Industries’ current financial-year revenues and EPS suggests growth of 15.3% and 25.7%, respectively, from the corresponding earlier fiscal year’s reported figures.
lululemon, the designer and distributor of athletic apparel and accessories, carries a Zacks Rank of 2. LULU has an expected EPS growth rate of 20% for three-five years.
The Zacks Consensus Estimate for lululemon’s current financial-year sales and EPS suggests growth of 26.6% and 25.9%, respectively, from the comparable preceding fiscal year’s reported numbers. LULU has a trailing four-quarter earnings surprise of 10.4%, on average.
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SnapOn Incorporated (SNA) : Free Stock Analysis Report
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