Snap-on (SNA) Looks Well Placed on RCI Initiative & Cost Plans
Snap-on Incorporated SNA has been in good strides driven by solid market positioning and positive near-term prospects, underpinned by innovative products, a resilient franchise network and robust financial performance. Continued positive business momentum and contributions from its Value Creation plan have been key drivers.
SNA is on track with its Rapid Continuous Improvement (“RCI”) process and other cost-reduction initiatives. Higher sales volume, pricing actions, lower material and other costs, as well as gains from the company's RCI initiatives, have been aiding margin expansion.
Backed by these initiatives, Snap-on’s top and bottom lines improved year over year in the third quarter of 2023. Its earnings advanced 9%, while sales improved 5.2%.
The company, currently carrying a Zacks Rank #2 (Buy), has a market capitalization of $14.8 billion. In the past year, SNA’s shares gained 16.8% against the industry’s decline of 1.1%. The stock also outpaced the sector, which rose 7.6% in the same period.
The Zacks Consensus Estimate for SNA’s 2023 sales and earnings suggest growth of 5.5% and 10.7%, respectively, from the year-ago numbers.
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Trends Favoring Snap-on
Snap-on’s robust business model helps it enhance value-creation processes, which in turn improves safety, quality of service, customer satisfaction and innovation. The company’s growth strategy focuses on three critical areas, namely enhancing the franchise network, improving relationships with repair shop owners and managers and expanding critical industries in emerging markets.
SNA is dedicated to various strategic principles and processes aimed at creating value in areas like RCI. The RCI process is designed to enhance organizational effectiveness and minimize costs, besides helping 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, along with enhancing manufacturing and supply chain capabilities through the RCI initiatives and further investments. Snap-on’s ability to innovate bodes well. It has been investing in new products and increasing brand awareness globally.
SNA’s business trends remain robust, as evidenced by its strong performance across its operating segments. In the Commercial & Industrial Group, sales increased 2.7% from the previous year in the third quarter, driven by organic sales growth of 3.2%. Organic growth was supported by increased activity with customers in critical industries.
The Tools Group segment saw a 3.8% sales rise year over year, attributed to organic sales growth of 3.7% and a positive foreign currency impact of $0.5 million. Strong sales in international operations and U.S. franchise operations contributed to organic sales growth.
In the Repair Systems & Information Group, sales advanced by 4.3% year over year, with organic sales growth of 3.1% and a positive currency impact of $4.8 million. Organic sales growth was bolstered by robust sales of diagnostics and repair information products to independent repair shop owners and managers, as well as an increase in sales of under-car equipment. Also, the Financial Services business experienced an 8.7% year-over-year increase in revenues in the third quarter.
Other Key Picks
We have highlighted some other top-ranked stocks from the broader Consumer Staples space, namely GIII Apparel Group GIII, lululemon athletica LULU and The RealReal REAL.
GIII Apparel currently sports a Zacks Rank #1 (Strong Buy). It has a trailing four-quarter earnings surprise of 541.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for GIII Apparel’s current financial-year earnings suggests growth of 39.3% from the prior-year levels. The consensus mark for GIII’s earnings per share (“EPS”) has moved up 4.7% in the past 30 days.
lululemon currently has a Zacks Rank #2. LULU has a trailing four-quarter earnings surprise of 9.2%, on average.
The Zacks Consensus Estimate for lululemon’s current financial-year sales and earnings indicates a rise of 18.3% and 23.3%, respectively, from the year-ago numbers. The consensus mark for LULU’s EPS has moved up by a penny in the past seven days.
RealReal currently carries a Zacks Rank #2. REAL has a trailing four-quarter earnings surprise of 22.1%, on average.
The Zacks Consensus Estimate for RealReal’s current financial year’s earnings implies an improvement of 39.9% from the year-earlier actuals. The consensus mark for REAL’s EPS has been unchanged in the past 30 days.
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Snap-On Incorporated (SNA) : Free Stock Analysis Report
lululemon athletica inc. (LULU) : Free Stock Analysis Report
G-III Apparel Group, LTD. (GIII) : Free Stock Analysis Report
The RealReal, Inc. (REAL) : Free Stock Analysis Report
