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Snap-On (SNA) to Report Q2 Earnings: What You Should Know

Zacks Equity Research

Snap-on Inc. SNA is scheduled to report second-quarter 2019 results on Jul 18, before the opening bell. Notably, the company delivered a positive earnings surprise in the trailing four quarters, the average beat being 2.5%.

The Zacks Consensus Estimate for second-quarter earnings is pegged at $3.21, reflecting a 3.2% improvement year over year. The company’s estimates have remained unchanged over the past 30 days. For revenues, the consensus mark stands at $959.5 million, suggesting a 0.5% increase from the year-ago reported figure.

Snap-On Incorporated Price and EPS Surprise


Snap-On Incorporated Price and EPS Surprise

Snap-On Incorporated price-eps-surprise | Snap-On Incorporated Quote

What You Should Know Prior to 2Q19

A robust business model and focus on value-creation processes have been driving the company’s earnings performance for the past several quarters. These efforts also help in improving safety, quality of service, customer satisfaction and innovation. We expect to see a reflection of continued gains from these actions in the second quarter.

In fact, the company’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 emerging markets. Furthermore, Snap-on is dedicated to various strategic principles and processes aimed at creating value in areas like Rapid Continuous Improvement (RCI). The RCI process is designed to enhance organizational effectiveness and minimize costs besides helping the company to boost sales and margins, and generate savings. Notably, savings from RCI initiatives mainly drove gross margin in the first quarter, which is likely to continue in the second quarter.

Moreover, the company’s efforts to innovate bode well, which are significantly contributing to its sales performance. It has been investing in new products and increasing brand awareness across the world as well. Accordingly, the company has been launching several products across its businesses, which should again aid quarterly results this time around.

Moving on, management expects these positives to continue in 2019. The company anticipates making progress on defined strategies for growth in 2019, which should boost its bottom line in the quarters ahead. It expects to leverage capabilities in the automotive repair area besides strengthening the overall professional customer base. Apart from automotive repair, Snap-on expects to add customers from adjacent markets, newer geographies and other areas like critical industries.

However, soft sales have been a reason for concern for the company over the past few quarters. It reported the fourth straight quarter of negative sales surprise in first-quarter 2019. Moreover, sales dropped 1.5% in the first quarter due to adverse impacts of foreign currency translations, partly offset by organic sales growth.

Decline in sales across the Commercial & Industrial Group, and Repair Systems & Information Group segments also hurt the company’s top-line performance. Lower sales at the Asia Pacific operations negatively impacted the Commercial & Industrial Group division. Sales at Repair Systems & Information Group were negatively impacted by the decline in organic sales mainly due to lower sales of undercar equipment. Soft performance across its business segments as well as foreign currency headwinds should continue denting results in the second quarter.

A Look at Zacks Model

Our proven model does not conclusively show that Snap-on is likely to beat earnings estimates in the second quarter. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Snap-on currently has a Zacks Rank #4 (Sell) and an Earnings ESP of +0.18%. The combination of negative Rank with positive ESP makes surprise prediction difficult.

Stocks Poised to Beat Earnings Estimates

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

Prestige Consumer Healthcare Inc. PBH has an Earnings ESP of +1.56% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Rent-A-Center, Inc. RCII has an Earnings ESP of +3.88% and a Zacks Rank of 2.

Skechers U.S.A., Inc. SKX has an Earnings ESP of +6.06% and a Zacks Rank #2.

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