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It has been about a month since the last earnings report for Snap-On (SNA). Shares have added about 3.5% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Snap-On due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Snap-on's Q2 Earnings Miss Estimates, Sales Beat
Snap-on posted second-quarter 2020 results, wherein the bottom line lagged the Zacks Consensus Estimate while sales surpassed the same. Further, the top and bottom lines decreased year over year. Results were affected by the tough economic environment and unprecedented COVID-19 impacts. From April to May and June, the company witnessed a declining sales trend.
Q2 in Details
Snap-on’s adjusted earnings of $1.91 per share in second-quarter 2020 missed the Zacks Consensus Estimate of $1.94. Moreover, the figure was down 40.7% from the year-ago quarter’s adjusted earnings of $3.22 per share.
Net sales declined 23.9% to $724.3 million but beat the Zacks Consensus Estimate of $708 million. The downside can be attributed to soft organic sales to the tune of 22.9% and a $14.4-million adverse impact from foreign currency translations. However, the growth was offset by $2.3 million in contributions from acquisitions.
Further, the company’s adjusted operating earnings before financial services totaled $95.1 million, down 49.9% year over year.
Adjusted operating earnings of $152.7 million were down 39% from the prior-year quarter. Additionally, adjusted operating earnings margin contracted significantly to 18.9% in the quarter under review.
Segmental Details
Sales at Commercial & Industrial Group fell 21.8% from the prior-year quarter to $261.9 million due to an organic sales decline of 20.2% and currency headwinds of $6.9 million. This was somewhat offset by $0.7-million gains from acquisitions. Sales decline in critical industries and the power tools operation to the tune of mid-teens hurt the segment.
The Tools Group segment’s sales fell 20.3% year over year to $323.3 million due to a 19.7% decline in organic sales and a $3.3-million impact of currency headwinds. Organic sales were hurt as sales in the United States fell by mid-teens and in international franchise operations by 40%.
Sales at Repair Systems & Information Group declined 29.8% year over year to $245 million. Moreover, organic sales at the segment dropped 29.5% from the year-ago quarter due to lower sales to OEM dealerships and softness in undercar equipment to the tune of more than 30% along with sales decline of mid-teen digit in diagnostics and repair information products to independent repair shop owners and managers. Further, unfavorable currency rates hurt the top line to the tune of $4.8 million. However, sales of $2.3 million from buyouts aided growth.
Nevertheless, the Financial Services business reported revenues of $57.6 million, down from $84.6 million in the year-ago quarter.