Snap-on (SNA) Gains from Innovation, Customer-Centric Approach
Snap-on Incorporated SNA has been experiencing dynamic growth, strong market positioning and positive near-term prospects, underpinned by innovative products, a resilient franchise network and robust financial performance.
Snap-on highlighted the successful launch of innovative products, such as the Zeus Plus and the triple function ratchet, contributing to its growth. The company's capacity expansions were also emphasized, leading to improved performance in various segments.
The capacity expansion has contributed to the company's robust market share growth, with reported sales increasing 5.2% year over year in third-quarter 2023, demonstrating a clear upward trajectory in operational income and sales across various segments.
Snap-on emphasizes customer connection and innovation in its value-creation process. This approach involves developing new products and solutions that simplify critical tasks, as demonstrated by the launch of the CT9038 power tool. The tool's design, emphasizing compactness and efficiency, exemplifies Snap-on's focus on customer-centric innovation.
The vehicle repair market, a key segment for Snap-on, showed positive trends. The increasing average age of vehicles and the growing number of technicians in garages indicate rising demand for the company's products and services. Despite external challenges like the Ukraine war and the pandemic's remnants, critical industries like aviation and industrial markets remain robust, offering Snap-on significant growth potential in the third quarter.
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RCI Initiatives Bodes Well
The Rapid Continuous Improvement (RCI) initiatives have played a crucial role in increasing sales volumes and enhancing pricing actions, which, in turn, have reduced material and other costs. Notably, the gross margin expanded 160 bps year over year to 49.9%.
The upside can be attributable to contributions from higher sales volumes and pricing actions, lower material and other costs, and gains from the company's RCI initiatives.
Struggle with Rising Operating Costs
However, Snap-on has experienced a surge in operating expenses, primarily driven by increased personnel and related costs. In the third quarter of 2023, these expenses rose 7.7% year over year. The operating expenses, as a percentage of net sales, witnessed a rise of 70 bps to reach 28.7% compared with 28% of the previous year.
Share Price Movement & Estimates
Shares of this Zacks Rank #3 (Hold) company have rallied 18% in the past year against the industry’s decline of 2.4%.
The Zacks Consensus Estimate for the current and next fiscal year has been unchanged at $18.62 and $19.35, respectively, over the past 30 days.
Stocks to Consider
A few better-ranked stocks are G-III Apparel Group, Ltd. GIII, NIKE Inc. NKE and American Eagle Outfitters Inc. AEO.
G-III Apparel Group, Ltd. is a manufacturer, designer and distributor of apparel and accessories. It currently sports a Zacks Rank #1 (Strong Buy). The company recorded an EPS surprise of 33.7% in the last reported quarter.
You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for G-III Apparel Group’s current fiscal-year sales suggests growth of 33% from the year-ago reported number. GIII has a trailing four-quarter earnings surprise of 541.8%, on average.
NIKE is engaged in the business of designing, developing and marketing of athletic footwear, apparel, equipment and accessories. It currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for NIKE’s current fiscal-year earnings and sales indicates growth of 15.8% and 3.7%, respectively, from the previous year’s reported numbers. NKE has a trailing four-quarter average earnings surprise of 27.1%.
American Eagle Outfitters is a specialty retailer of casual apparel, accessories and footwear for men and women. It currently has a Zacks Rank #2.
The Zacks Consensus Estimate for American Eagle Outfitters’ current fiscal-year earnings and sales indicates growth of 39.2% and 4%, respectively, from the previous year’s reported numbers. AEO has a trailing four-quarter average earnings surprise of 23%.
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NIKE, Inc. (NKE) : Free Stock Analysis Report
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