Snap-on Incorporated SNA is scheduled to report its first-quarter 2015 results before the opening bell on Apr 23.
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 7.7%, with an average earnings surprise of 7.16% over the last four quarters.
Let’s have a look at how things are shaping up for the first-quarter results.
Growth Factors in the Past Quarter
Snap-on, a global provider of professional tools, equipment and related solutions, has been cashing in on economic growth even as strength in the U.S. dollar poses a big risk to the profitability of its foreign operations. One of the most durable growth factors for the company is dynamism of the automobile industry. Technological developments in the industry translate into sustained demand for Snap-on products.
The company’s initiative – Rapid Continuous Improvement (RCI) – forms one of its key growth strategies. Snap-on’s recent acquisition of Pro-Cut International, is also likely to be a positive for the company, as it perfectly complements Snap-on’s Repair Systems & Information Group segment’s business.
Apart from strong demand across the board, the biggest catalysts for the company at present remain a steadily recovering domestic economy and weak oil prices. The low oil prices are expected to directly boost Snap-on’s bottom line.
Emerging countries have huge growth potential for the company as the repair wave takes hold in those markets. However, its current international operations provide Snap-on exposure to adverse foreign currency fluctuations as well as macroeconomic headwinds, which could hamper the company’s profitability to some extent. Additionally, increasing raw material costs remain a concern.
Also, the company’s active acquisition strategies involve high integration costs and increase its debt burden, which translates to higher interest burden. 2014 saw an increase of almost $4 million in the company’s long-term debt, compared with 2013. The increased debt servicing costs might erode profitability and margins in this quarter.
Earnings Whispers
Our proven model shows that Snap-on is likely to beat earnings because it has the right combination of two key ingredients.
Zacks ESP: Earnings ESP for Snap-on is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.83.
Zacks Rank: Snap-on’s Zacks Rank #3 (Hold), when combined with a 0.00% ESP, makes surprise prediction difficult. We caution against stocks with Zacks #4 and 5 Ranks (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks That Warrant a Look
Here are some companies in the industrial products space 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:
Caterpillar Inc. CAT has an Earnings ESP of +2.21% and carries a Zacks Rank #3. It is scheduled to report results on Apr 23.
Heritage-Crystal Clean, Inc HCCI has an Earnings ESP of +33.33% and carries a Zacks Rank #3. It is scheduled to report results on Apr 29.
Ingersoll-Rand Plc IR has an Earnings ESP of +3.23% and carries a Zacks Rank #3. It is scheduled to report results on Apr 23.
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