Snap-on Posts Healthy Q3 Earnings on Improved Operations

Snap-on Inc. SNA reported strong third-quarter 2015 net earnings per share of $1.98, which surpassed the Zacks Consensus Estimate of $1.93 per share by 2.6% and the year-ago figure of $1.76 by 12.5%.

Quarterly earnings benefitted from the higher growth organic sales and operating earnings before financial services.

Inside the Headlines

Net sales in the third quarter increased 1.9% year over year to $821.5 million but were below the Zacks Consensus Estimate of $840 million. Excluding acquisition related expenses and favorable foreign currency translation effect, organic sales rose 7.3% year over year.

As per the segments, the Commercial & Industrial Group segment sales decreased 3.4% year over year to $288.5 million. Organic sales also increased 3.4% year over year aided by sales gain in Asia/Pacific and power tools and European-based hand tools operations. However, low sales to the military and to customers in the oil and gas sector were the headwind.

The Snap-on Tools Group segment revenues improved 7.2% year over year to $380.6 million. Meanwhile, organic sales were up 11.0% driven by significant gains in both the U.S. and international franchise operations.

The Repair Systems & Information segment recorded a sales increase of 4.3% year over year to $282.9 million. Also, organic sales were up 8.2% year over year on the back of continued higher sales to OEM dealerships and rise in sales of diagnostic and repair information products as well as undercar equipment.

On the other hand, Financial Services business reported revenues of $61.1 million compared with $53.6 million in the year-ago quarter.

In addition, operating earnings before financial services for the third quarter rose to $143.6 million from $130.6 million in year-ago quarter.

In third-quarter 2015, the effective income tax rate was 31.6% compared to 31.8% in 2014.

Liquidity

At the end of the third quarter, cash and cash equivalents totaled $119.2 million compared with $132.9 million at the end of 2014. The company had long-term debt of $864.1 million compared to $862.7 million at the end of 2014.

Going forward

In 2015, Snap-on has planned to progress with its initiatives meant for coherent growth such as vehicle repair garage expansions, enhancement of franchise network and spreading footprints across critical industries as well as emerging markets.

Owing to these initiatives, Snap-on projects to incur capital expenditures in the range of $80–$90 million this year. Moreover, the company expects the effective income tax rate for 2015 to be at or below its 2014 rate.

Snap-on currently has a Zacks Rank #3 (Hold). Better-ranked stocks include Dycom Industries Inc. DY, Energous Corporation WATT and Powell Industries, Inc. POWL. While Dycom sports a Zacks Rank #1 (Strong Buy), both Energous Corporation and Powell Industries hold a Zacks Rank #2 (Buy).

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