Here's What Makes Snap-On The 'Top Idea' At Baird

Snap-on Incorporated SNA remains Baird’s top pick, with analyst David Leiker reiterating an Outperform rating and $197 price target.

Leiker expects shareholder returns to approach 20-percent annual through 2020.

The analyst’s view was reaffirmed by a recent shift in investor sentiment, with a new theme being long investors “looking to get more involved.”

The shift followed a strong second quarter earnings report on July 20. The company reported EPS of $2.60 compared with $2.36 in the same quarter last year and $921.4 million in sales, up about $50 million year over year.

Before the report, “virtually 100 percent of inbound calls” Leiker received were negative. Leiker notes that 10 percent of shares are still short.

Snap-on’s business model has proven to be very profitable, with a 21-percent return on equity for its core business and near 30 percent for Snap-on Credit. The company has been the Street’s estimates every quarter for the past seven years.

Moving forward, Leiker will be looking to see rising Tools Group growth, stable-to-down originations and stable credit metrics.

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