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Snap-on (SNA) Q3 Earnings Preview; What to Expect?

Snap-on IncorporatedSNA is schedule to report its third-quarter 2015 results, before the opening bell, on Oct 22.

Snap-on has not missed earnings expectations in five years - an extraordinary feat. In the last reported quarter, it registered a positive earnings surprise of 3.1%, with an average earnings surprise of 5.6% over the last four quarters.

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

Factors to consider

Snap-on's Repair Systems & Information segment has been gaining traction on the back of factors like rising penetration in emerging markets, continued software and hardware upgrades, productivity enhancements. In this segment, undercar equipment is an important, high visibility and high-value product line for the company and has been major revenue driver since the past quarters. It allows Snap-on to clearly showcase its advantage in innovation, thus helping the company improve its position in Asia Pacific.

Moreover, to enhance this segment further, during the last three quarters, Snap-on completed the buyout of Italy-based Ecotechnics S.p.A. for $13 million in cash. Ecotechnics is a popular name among modern auto repair shops across the world. The company holds a proven record of designing and manufacturing maintenance equipment for automatic vehicle air conditioning, which witnesses high demand from OEM dealerships and the automotive aftermarket.

However, strengthening of U.S. Dollar and macroeconomic turbulences continue to bother the company's financials. Around one-third of the company's revenues are derived from its European businesses, which continue to be impacted by weakness in Eastern Europe, Greece and Russia, thereby providing limited visibility regarding the company's future performance. Apart from Europe, Snap-on has been suffering from prevailing sluggishness in markets like Japan and Middle-East.

Earnings Whispers?

However, our proven model does not conclusively show that Snap-on is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP : Earnings ESP, that represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.93.

Zacks Rank : Snap-on's Zacks Rank #3, when combined with 0.00% ESP, makes surprise prediction difficult. Note that stocks with a Zacks Rank #1, 2 or 3 have a significantly higher chance of beating earnings.

We caution against stocks with Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks That Warrant a Look

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

Allegiant Travel Company ALGT , earnings ESP of +0.76% and a Zacks Rank #2.

The Chubb Corporation CB , earnings ESP of +3.57% and a Zacks Rank #2.

Capital One Financial Corporation COF , earnings ESP of +2.08% and a Zacks Rank #3.

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CAPITAL ONE FIN (COF): Free Stock Analysis Report

CHUBB CORP (CB): Free Stock Analysis Report

SNAP-ON INC (SNA): Free Stock Analysis Report

ALLEGIANT TRAVL (ALGT): Free Stock Analysis Report

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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.


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

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