Snap-on Beats on Q1 Earnings
Snap-on Inc. (SNA) reported strong first-quarter 2014 results with healthy growth in net sales and earnings. Net income for the reported quarter increased to $95.9 million or $1.62 per share from $82.8 million or $1.40 per share in the year-earlier quarter. Reported earnings exceeded the Zacks Consensus Estimate of $1.55 per share by 4.5%.
Management’s focus on enhancing van network, increasing repair shop owners and managers, extending service to critical industries, strategic acquisitions and expansion in emerging markets continued to favorably benefit the company.
Revenues
Net sales of the company for the first quarter increased 6.2% year over year to $787.5 million. Excluding inorganic revenues of $15.2 million from the May 2013 acquisition of Challenger Lifts, Inc. and $5.9 million of adverse foreign currency translation effects, organic sales increased 5.0% year over year. Total quarterly revenue was above the Zacks Consensus Estimate of $782 million.
Segment Results
The Commercial & Industrial Group segment sales increased a robust 9.1% year over year to $290.6 million driven by higher sales in power tools and European hand tools business. Organic sales also increased 10.4% year over year.
The Snap-on Tools Group segment sales increased 5.0% year over year to $343.6 million, driven by sales gains in both the U.S. and international franchise operations. Organic sales were up 6.0%.
The Repair Systems & Information segment sales increased 6.7% year over year to $262.7 million, primarily on gains in sales of diagnostics and repair information products to repair shop owners and managers. Organic sales were up $0.7 million year over year. Lower sales in original equipment manufacturer dealerships proved to be a headwind for the business.
Financial Services reported revenues of $34.4 million compared with $50.2 million in the year-ago quarter. Operating earnings for the segment were $30.5 million compared with $44.0 million in the prior-year period.
Snap-on registered consolidated operating earnings of $180.8 million or 23% of total revenue for fourth-quarter 2013 compared with $164.8 million or 22.2% of total revenue in the prior-year quarter.
Balance Sheet & Cash Flow
Cash and cash equivalents at year-end 2013 were $127.8 million compared with $217.6 million at the end of 2013. The company had a long-term debt of $858.9 million, which was similar to the 2013 level. Net cash provided by operating activities increased to $88.3 million in the reported quarter from $75.7 million in the first quarter of 2013.
Outlook
Snap-on expects to incur capital expenditures in the range of $70 million to $80 million in 2014. The company also noted that it will continue to focus on emerging markets, expand its presence in new industries, enhance its mobile tool distribution network and expand in the vehicle repair garage market going forward.
Snap-on currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the industry include Toyota Motor Corporation (TM), Toro Co. (TTC) and Alamo Group Inc. (ALG). While Toyota Motors carries a Zacks Rank #1 (Strong Buy), Toro and Alamo have a Zacks Rank #2 (Buy).
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