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What’s in the Store for Snap-on (SNA) This Earnings Season?

Zacks

Snap-on Incorporated SNA is scheduled to report first-quarter 2018 results on Apr 19, before the opening bell.

Snap-on has an excellent earnings surprise history. The company has not missed estimates in the last seven years. Last quarter, it delivered a positive surprise of 1.1%, with an average beat of 1.5% for the trailing four quarters.

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

Factors to Consider


Over the past few quarters, Snap-On has been witnessing encouraging prospects in most of its business lines that indicate at brighter prospects in the future. The company’s Repair Systems & Information business has been gaining traction, driven by a rising penetration in the emerging markets apart from continued software and hardware upgrades as well as productivity enhancements. For instance, in the fourth quarter of 2017, the company witnessed substantial achievements in the segment with improving position of repair shop owners and managers. We believe that Repair Systems & Information group’s business, which deals with independent repair shop owners and managers, is likely be a major growth driver in the near term.

Segment wise, the company’s Commercial & Industrial Group has been enjoying strong momentum. It has been benefiting from increased sales to customers in critical industries and a strong European-based hand tools business. Additionally, the company’s recent buyout of Car-O-Liner has strengthened its Repair Systems & Information Group position, fortifying its footprint in the auto and heavy duty markets.

Moreover, one of the company’s key fortes includes its ability to innovate, which led to sales growth over the last nine decades. The company has been investing in new products and growing brand awareness across the world. Particularly, it has been working toward expanding its base ‘beyond the garage’ and offering advanced exclusive solutions to professionals performing critical tasks. Further, we believe that selected investment opportunities along with the company’s broad product line, offer modest growth options.

Snap-On Incorporated Price, Consensus and EPS Surprise

Despite these positives, persistent softness in the industrial markets has significantly impacted client spending, marring the company’s prospects. Also, the aerospace project is facing some weakness in the Middle East region, which is adding to its woes. Besides, a sluggish oil and gas market activity continues to affect the company’s revenues from the industrial market, which in turn is likely to thwart Snap-on’s top line in the quarter to be reported.

Earnings Whispers

Our proven model does not show that Snap-On is likely to beat estimates in this quarter. This is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. This is not the case here as you will see below:

Zacks ESP: The company’s Earnings ESP is +1.59%, as the Most Accurate Estimate is $2.77 and the Zacks Consensus Estimate is pegged at $2.73. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Snap-On has a Zacks Rank #4 (Sell).We caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

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

Allegheny Technologies Incorporated ATI has an Earnings ESP of +9.38% and a Zacks Rank of 1. The company is expected to release quarterly numbers around Apr 24. You can see the complete list of today’s Zacks #1 Rank stocks here.

Century Aluminum Company CENX, with an Earnings ESP of +29.41% and a Zacks Rank of 1, is slated to report results on Apr 24.

Watsco, Inc. WSO has an Earnings ESP of +3.96% and a Zacks Rank of 2. The company is likely to release earnings on Apr 24.

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