Snap-on to $190?

So says Barrington Research via Barron’s:

We are raising our rating on Snap-On to Outperform from Market Perform based on valuation, our belief in a gradual rebound in the Tools Group results in 2018 and the company’s positive long-term outlook driven by secular trends for vehicle repair. Our price target range is $180-$190.

Based on better-than-expected third-quarter results, we raised our 2017 earnings-per-share estimate on Snap-On (ticker: SNA) to $10.09 (from $10.06) and maintained our 2018 EPS estimate at $11.00.

Snap-On’s third-quarter sales of $903.8 million increased 8.4% including an organic sales increase of 2.3% and $44.3 million of acquisition-related sales. EPS for the quarter, excluding a pretax charge of $15 million, totaled $2.45, representing a 10.2% year-over-year increase. Our estimates for the third quarter called for net sales of $867 million and EPS of $2.39. The First Call consensus estimates called for net sales and EPS of $891 million and $2.43, respectively.

Positives in the quarter included strong performances from both the Repair Systems & Information (RS&I) and Commercial & Industrial (C&I) Groups, while the Tools Group continues to exhibit sluggishness due in large part to U.S. franchise operations that registered a mid-single-digit sales decline.

RS&I Group sales of $333.5 million increased 16.6% with an 8.2% organic sales increase, $21.6 million of acquisition-related sales and $2.1 million of favorable exchange rates. Organic sales growth in the quarter was driven by high-single-digit sales gains in diagnostics and repair information products to independent repair shops, mid-single-digit growth in sales to original equipment manufacturer (OEM) dealerships and low-single-digit sales gains in undercar equipment. Operating earnings increased 16.2% to $83.4 million.

C&I Group sales increased 8.7% to $314.6 million reflecting organic growth of 0.2%, $22.7 million of acquisition-related sales and $2 million of favorable exchange rates. C&I experienced high- single-digit sales gains to customers in critical industries with mid-single-digit sales growth in the European hand tools business, offset by declines in power tool sales and Asia-Pacific operations. Operating earnings increased 14.6% to $50.1 million.

Tools Group sales of $392.7 million decreased 1.1% reflecting an organic sales decline of 1.6% driven by a mid-single-digit decline in U.S. franchise operations that was partially offset by a double-digit sales increase in European operations. Hurricanes in the U.S. during the quarter negatively impacted sales by $8 million. Operating earnings declined by 12.8% to $56.3 million.

Financial Services operating earnings increased 10.7% to $56 million on revenue growth of 10.3% to $79 million. Originations of $271.8 million increased by $2 million year-over-year.

Posted by on October 23rd, 2017 at 1:48 pm


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