Baird has maintained a Neutral rating on Snap-On (NYSE: SNA) but increased the price target to $290 from $275.
The adjustment follows Snap-On's second quarter report for 2024, which presented a mixed performance with varying results across its business segments.
Snap-On experienced a challenging quarter in its Tools Group, with sales dropping by approximately $18 million sequentially, despite expectations for a seasonal uptick. This decline was attributed to heightened uncertainty among mechanics, which saw a slight increase compared to the previous quarter.
However, not all news was negative for the company, as Snap-On's Construction & Industrial (C&I) and Repair Systems & Information (RS&I) segments excluding the Tools Group reported healthier growth. Both segments also achieved year-over-year and quarter-over-quarter gross margin expansion.
Looking ahead, Baird adjusted its estimates for the Tools Group, lowering them to better reflect average seasonality for the second half of 2024 and into early 2025. This revision leads to a projected 9.5% decrease in organic growth for the third quarter of 2024.
As for the C&I segment, expectations are set for only a slight organic growth in the current quarter, mirroring the second quarter's performance. The RS&I segment is also anticipated to deliver similar results to the previous quarter.
Despite the lower sales estimate for the third quarter of 2024 overall, Baird projects that Snap-On's earnings per share (EPS) will be $0.01 higher than the current consensus on FactSet. This projection is bolstered by Snap-On's management's track record of consistently outperforming consensus, even amidst a challenging environment for auto mechanic sentiment.
In other recent news, Snap-On Incorporated (NYSE:SNA) revealed mixed results in its second quarter 2024 earnings call. Despite a slight decrease in sales to $1,179.4 million and a 1.1% dip in organic sales, the company managed to achieve a record operating income (OI) margin of 23.8%. The consolidated OI margin also rose to 27.4%, and the company's financial services saw growth with OI reaching $70.2 million. The adjusted earnings per share (EPS) stood at $4.91.
CFRA recently updated its rating on Snap-On, shifting from a Sell to a Hold stance while also increasing the stock's price target from $260.00 to $285.00. The adjustment is based on an expectation of improved sales and earnings growth for the company in 2025. However, CFRA anticipates that revenues in the second half of the year will show minimal growth, with an expected year-over-year increase of 1%.
Despite these challenges, Snap-On's Repair Systems & Information and Commercial and Industrial groups performed well, with the latter posting an organic sales gain of 1.2% and a 16.7% OI margin.
InvestingPro Insights
Snap-On's recent performance and Baird's analysis can be further contextualized with real-time data from InvestingPro. The company's market capitalization stands at $15.06 billion, reflecting its significant presence in the tools and equipment industry. Snap-On's P/E ratio of 14.6 suggests that the stock is reasonably valued relative to its earnings, which aligns with Baird's Neutral rating.
InvestingPro Tips highlight Snap-On's financial strength and shareholder-friendly policies. The company has maintained dividend payments for an impressive 54 consecutive years and has raised its dividend for 14 consecutive years. This consistent dividend history underscores Snap-On's commitment to returning value to shareholders, even in challenging market conditions as described in the article.
Moreover, Snap-On's impressive gross profit margins, as noted in the InvestingPro Tips, are reflected in the latest data showing a gross profit margin of 51.39% for the last twelve months. This robust margin supports the company's ability to navigate through periods of uncertainty, such as the current challenges in the Tools Group segment mentioned in the article.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Snap-On, providing deeper insights into the company's financial health and market position.
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