Snap-On (SNA) Reports In-Line Q4 EPS, Revenues Miss

Snap-On (NYSE: SNA) reported Q4 EPS of $3.08, in-line with the analyst estimate of $3.08. Revenue for the quarter came in at $955.2 million versus the consensus estimate of $965.61 million.

• Net sales of $955.2 million in the quarter increased $2.7 million, or 0.3%, from 2018 levels, reflecting a $5.5 million, or 0.6%, organic sales increase and $3.5 million of acquisition-related sales, partially offset by $6.3 million of unfavorable foreign currency translation.
• Operating earnings before financial services for the quarter of $171.4 million, or 17.9% of sales, including $2.5 million of unfavorable foreign currency effects, compared to $182.1 million, or 19.1% of sales last year. In 2018, operating earnings before financial services included a $4.3 million benefit from the settlement of an employment-related litigation matter that was being appealed (the “2018 legal settlement”); excluding the 2018 legal settlement, operating earnings before financial services, as adjusted, were $177.8 million, or 18.7% of sales last year.
• Financial services revenue in the quarter of $83.9 million increased $1.2 million from 2018 levels; financial services operating earnings of $62.2 million compared to $56.1 million last year.
• Consolidated operating earnings totaled $233.6 million, including $2.6 million of unfavorable foreign currency effects, which compared to $238.2 million in the fourth quarter of 2018. As a percentage of revenues (net sales plus financial services revenue), consolidated operating earnings were 22.5% and 23.0% in the fourth quarters of 2019 and 2018, respectively. Excluding the 2018 legal settlement, consolidated operating earnings, as adjusted, were $233.9 million, or 22.6% of revenues, a year ago.
• The fourth quarter effective income tax rate was 22.3% in 2019 and 22.0% in 2018.
• Net earnings of $170.6 million, or $3.08 per diluted share, in the quarter compared to $175.0 million, or $3.09 per diluted share, a year ago. Excluding the 2018 legal settlement, net earnings, as adjusted, were $171.8 million, or $3.03 per diluted share, in 2018.
• Full year net sales of $3,730.0 million decreased $10.7 million, or 0.3%, from 2018 levels, reflecting a $45.4 million, or 1.2%, organic sales gain and $7.5 million of acquisition-related sales, more than offset by $63.6 million of unfavorable foreign currency translation. Full year net earnings of $693.5 million, or $12.41 per diluted share, compared to net earnings of $679.9 million, or $11.87 per diluted share, last year. In 2019, excluding the first quarter legal settlement related to a patent-related litigation matter that was being appealed (the “2019 legal settlement”), net earnings, as adjusted, were $684.8 million, or $12.26 per diluted share. In 2018, excluding the first quarter net debt items related to the issuance and extinguishment of debt, the 2018 legal settlement and a charge associated with U.S. tax legislation (the “tax charge”), net earnings, as adjusted, were $676.5 million, or $11.81 per diluted share. Earnings per diluted share, as adjusted, of $12.26 in 2019, increased 3.8% versus the prior year, as adjusted.

“We are encouraged by our progress in strengthening our operations in 2019 despite ongoing headwinds from unfavorable currency and economic challenges in certain geographies throughout the year,” said Nick Pinchuk, Snap-on chairman and chief executive officer. “Our results have demonstrated progress along a number of our runways for growth, including within our U.S. franchise network, and reflected the effectiveness of our Snap-on Value Creation Processes to help mitigate the headwinds. Finally, as we begin 2020, our 100th anniversary year, I want to thank our franchisees and associates for their ongoing contributions and to recognize their capabilities and commitment in making our progress possible now and in the future.”

Outlook

As Snap-on enters its 100th anniversary year, the company expects to make continued progress in 2020 along its defined runways for coherent growth, leveraging capabilities already demonstrated in the automotive repair arena and developing and expanding its professional customer base, not only in automotive repair, but in adjacent markets, additional geographies and other areas, including extending in critical industries, where the cost and penalties for failure can be high. In pursuit of these initiatives, Snap-on expects that capital expenditures in 2020 will be in a range of $90 million to $100 million.

Snap-on currently anticipates that its full year 2020 effective income tax rate will be in the range of 23% to 24%.

For earnings history and earnings-related data on Snap-On (SNA) click here.

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