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Will Product Innovations Drive Snap-on's (SNA) Q3 Earnings?


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Snap-on Inc.SNA is scheduled to report third-quarter 2018 results on Oct 18, before the opening bell. Notably, the company boasts an excellent surprise history, having surpassed earnings estimates for the past seven years.

The Zacks Consensus Estimate for the third quarter is pegged at $2.85, reflecting an improvement of 16.3% year over year. The consensus mark also moved up by a penny in the last 30 days. Notably, analysts polled by Zacks expect quarterly revenues to come in at $928.7 million, up about 2.8% from year-ago quarter number.

Snap-on Incorporated Price, Consensus and EPS Surprise

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



Let's see how things are shaping up for this announcement.

Factors Likely to Influence 3Q18

Snap-on's robust business model, which helps in enhancing the value-creation processes, is likely to drive growth. Also, product innovation has been boosting the company's sales since the past few quarters. We note that continued strength at its Repair Systems & Information business backed by rising penetration in the emerging markets, continued software and hardware upgrades as well as productivity enhancements too proved beneficial for Snap-on. In second-quarter 2018, the segment registered sales growth of 1.5% driven by higher sales of diagnostics and repair information products to independent repair shop owners and managers as well as OEM dealerships. Notably, the Repair Systems & Information business contributed nearly 35.9% to the company's overall sales in the quarter. This momentum is likely to continue in the upcoming quarter.

Furthermore, Snap-on's Rapid Continuous Improvement (RCI) program is encouraging. It is designed to enhance organizational effectiveness and minimize costs besides helping Snap-on to boost sales and margins, and generate savings. Management intends to boost customer services as well as enhance manufacturing and supply chain capabilities through the RCI initiatives and further investments.

Snap-on also remains focused on acquisitions to strengthen its portfolio. In second-quarter 2018, sales generated from acquisitions totaled $8.1 million, including Norbar operations and FASTORQ business.

All these initiatives have helped Snap-on to gain 15.8% in the past six months, outperforming the industry 's 5.6% growth.



However, the company has been witnessing softness across its Tools Group segment for a while now. This can be attributed to lower sales at company's U.S. franchise operations, which is hindering the segment's growth. In addition, stiff industry competition across its segments and challenges in various markets are potent concerns.

These apart, higher tariffs on steel might result in increased expenses, thus hurting margins and overall profitability.

Although management is making constant efforts to revive performance at the Tools Group division, it remains to be seen whether these efforts reverse the segment's performance in the to-be-reported quarter. Further, we expect Snap-on's robust strategic initiatives to drive the upcoming quarterly results.

Zacks Model

Our proven model conclusively shows that Snap-on is likely to beat earnings estimates in the third 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 has an Earnings ESP of +0.67% and a Zacks Rank #2, making us quite confident of an earnings beat.

Other Stocks Poised to Beat Earnings Estimates

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

Ralph Lauren Corporation RL has an Earnings ESP of +0.79% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

Wolverine World Wide, Inc. WWW has an Earnings ESP of +2.09% and a Zacks Rank of 2.

Leggett & Platt, Incorporated LEG has an Earnings ESP of +1.04% and a Zacks Rank #3.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: LEG , WWW , RL , SNA



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