Q3 Earnings Preview for Snap-on (NYSE:SNA)

in EARNINGS/INVESTING IDEAS by

Snap-on Incorporated (NYSE:SNA) is scheduled to report Q3 earnings results before markets open for trading on October 22, 2020.

The company is expected to report earnings of $2.12/share on revenue of $817.1 million. The consensus earnings per share (EPS) of $2.12/share is based on a poll of 7 analysts and represents a decline in eps of −28.3% over the same quarter last year, when the company reported earnings of $2.96/share.

The revenue forecast of $817.1 million based on a poll of 9 analysts implies a year-over-year (YoY) decline in revenue of −9.4%. Last year the company reported $901.8 million in revenue for the quarter.

Expected to report EPS contraction of −28.3% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $817.14 $901.80 −9.4%
EPS $2.12 $2.96 −28.3%

Earnings Call Trends

Historically, management has exceeded analyst expectations 6 out of the last 8 tracked quarters, missed 1 quarter, and met expectations 1 quarter.

What are your expectations from Snap-on Incorporated for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $1.83 $1.91 4.5% Beat
Q1, 2020 $2.79 $2.60 −6.7% Missed
Q4, 2019 $3.08 $3.08 0.0% Met
Q3, 2019 $2.93 $2.96 0.9% Beat
Q2, 2019 $3.21 $3.22 0.4% Beat
Q1, 2019 $2.90 $3.01 3.9% Beat
Q4, 2018 $3.01 $3.03 0.6% Beat
Q3, 2018 $2.86 $2.88 0.7% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 27, 2020, the stock price did not react much to the update.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
July 31, 2020 $145.30 $145.87 0.4% Increase
April 21, 2020 $114.66 $113.76 −0.8% Decline
February 6, 2020 $163.74 $155.74 −4.9% Decline
October 17, 2019 $158.03 $157.52 −0.3% Decline

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −2.84, the model suggests that the company is not likely to be an earnings manipulator. A value of −2.84 implies a 0.2% chance of earnings manipulation.

Fundamentals And Technical Analysis

Snap-on Incorporated is currently trading at $155.96/share, down −2.0% for the day. The company is trading at approximately 90.4% of its 52-week high of $172.61/share. The company’s stock price is up 6.9% since the last earnings report and up 0.3% over the previous week.

The company’s 14 Day Relative Price Index (RSI) of 54.74 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NYSE:SNA Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 14.81 and a forward P/E multiple of 16.80.

Snap-on Incorporated’s current share price also implies a price-to-book (P/B) multiple of 2.44. The following table summarizes some other key fundamental ratios:

Data as of October 20, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 27, 2020
Stock Price (Current) $155.96
P/E Ratio 14.8x
P/E Ratio (Fwd) 16.8x
PEG Ratio −1.0
Total Debt / Total Capital 14.7%
Levered Free Cash Flow $714.6 million
EV / EBITDA 10.1x

Finbox

Snap-on Incorporated is a mid-cap stock with a market capitalization of $8.495 billion and a total enterprise value of $9.343 billion. The company operates in the Industrials sector and the Machinery industry.

Snap-on Incorporated manufactures and markets tools, equipment, diagnostics, and repair information and systems solutions for professional users worldwide. It operates through Commercial & Industrial Group, Snap-on Tools Group, Repair Systems & Information Group, and Financial Services segments. The company offers hand tools, including wrenches, sockets, ratchet wrenches, pliers, screwdrivers, punches and chisels, saws and cutting tools, pruning tools, torque measuring instruments, and other products; power tools, such as cordless, pneumatic, hydraulic, and corded tools, such as impact wrenches, ratchets, screwdrivers, drills, sanders, grinders, etc.; and tool storage products comprising tool chests, roll cabinets, and other products. It also provides handheld and PC-based diagnostic products, service and repair information products, diagnostic software solutions, electronic parts catalogs, business management systems and services, point-of-sale systems, integrated systems for vehicle service shops, original equipment manufacturer purchasing facilitation services, and warranty management systems and analytics. In addition, the company offers solutions for the service of vehicles and industrial equipment that include wheel alignment equipment, wheel balancers, tire changers, vehicle lifts, test lane systems, collision repair equipment, vehicle air conditioning service equipment, brake service equipment, fluid exchange equipment, transmission troubleshooting equipment, safety testing equipment, battery chargers, and hoists. Further, it provides financing programs to facilitate the sales of its products and support its franchise business. The company serves the aviation and aerospace, agriculture, construction, government and military, mining, natural resources, power generation, and technical education industries, as well as vehicle dealerships and repair centers. Snap-on Incorporated was founded in 1920 and is headquartered in Kenosha, Wisconsin.

Expertise: financial modeling, mergers & acquisitions. Andy is also a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to do investment research. Andy’s background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights: - Sears Holdings Corp.’s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores. - Cerberus Capital Management’s $3.3 bn acquisition of SUPERVALU Inc.’s New Albertsons, Inc. assets. Andy can be reached at andy@finbox.io or at +1 (516) 778-6257.

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