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Snap-On (SNA) to Report Q1 Earnings: A Beat in the Cards?

Zacks Equity Research

Snap-on Incorporated SNA is scheduled to report first-quarter 2017 results, before the opening bell on Apr 20.

Snap-on has an outstanding earnings surprise history — it has not missed estimates in over seven years. Last quarter, it registered a positive earnings surprise of 2.5% and has an average positive surprise of 4% for the trailing four quarters.

Let's see how things are shaping up for this announcement and whether Snap-on is set to add yet another earnings beat to its long-standing winning streak.

Why a Likely Positive Surprise?

Our proven model shows that Snap-on has the right combination of the two key ingredients.

Zacks ESP: The Earnings ESP for Snap-on is +1.28% as the Most Accurate estimate is pegged at $2.37, while the Zacks Consensus Estimate is at $2.34. This is a major indicator of a likely positive earnings surprise for the company.You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Snap-on carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings.

The combination of Snap-on’s Zacks Rank #3 and ESP of +1.28% makes us confident of an earnings beat.  

We only caution against stocks with a Zacks Ranks #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

What's Driving the Better-Than-Expected Earnings?

Snap-on’s successful earnings streak reflects its consistent capability to leverage on market opportunities for augmenting growth. The company continues to make significant efforts toward improving its operating efficiency through the Snap-on Value Creation Processes. For instance, during Q4 2016, Snap-on’s value creation process contributed to the 3.6% organic sales growth, operating margin of 19.8% and an11.3% increase in earnings per share.

Encouragingly, the company has been witnessing encouraging prospects in most of its business lines that signal brighter days, going forward. Additionally, Snap-on’s financial services portfolio has been recording steady growth over the past few years.

Snap-On Incorporated Price, Consensus and EPS Surprise

Snap-On Incorporated Price, Consensus and EPS Surprise | Snap-On Incorporated Quote

In order to further boost growth, the company recently purchased the Sweden-based firm – Car-O-Liner – for $155 million. Snap-On believes that this buyout will strengthen its Repair Systems & Information Group position, thus allowing it to fortify its footprint in the auto and heavy-duty markets.

Snap-on also acquired torque wrench marker – Sturtevant Richmont — which is engaged in the designing, manufacturing and distributing of mechanical, and electronic torque wrenches. Snap-on believes that this strategic buyout will improve its critical mechanical performance by addressing critical torque requirements.

Additionally, Tools Group and Repair Systems & Information segments are anticipated to act as major profit churners on the back of positive industry trends. While factors like rising penetration in emerging markets, and constant software and hardware upgrades have been fuelling Tools Group’s growth; Repair Systems has been gaining from business deals with independent repair shop owners and managers. Further, Snap-On’s flourishing financial services portfolio will likely act as a catalyst for the quarter to be reported.

Other Stocks That Warrant a Look

Here are some other companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Pool Corporation POOL, which is expected to report quarterly earnings around Apr 20, has an Earnings ESP of +5.13% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

MGIC Investment Corporation MTG has an Earnings ESP of +8.33% and a Zacks Rank #2. The company is expected to report earnings around Apr 20.

First Financial Bancorp. FFBC has an Earnings ESP of +2.86% and a Zacks Rank #2. The company is expected to report quarterly earnings around Apr 20.

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First Financial Bancorp. (FFBC): Free Stock Analysis Report
 
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Snap-On Incorporated (SNA): Free Stock Analysis Report
 
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