Snap-on Incorporated SNA is in good shape, thanks to its solid business strategies. The company has been benefiting from its value-creation processes and Rapid Continuous Improvement (RCI) initiatives. 

SNA’s robust business model helps enhance value-creation processes, which, in turn, improve safety, quality of service, customer satisfaction and innovation. 

Let’s delve deeper.

Snap-on’s Growth Plans Aid

SNA has been progressing well in its strategic efforts. The company has been enhancing the franchise network, improving relationships with repair shop owners and managers, and expanding into critical industries in emerging markets. Management’s emphasis on the RCI process has been on track. 

The RCI process is aimed at enhancing organizational effectiveness, reducing costs and boosting sales and margins. Savings from this initiative come from continuous productivity and process-improvement plans. Management intends to boost customer services, along with enhancing manufacturing and supply-chain capabilities, through the RCI initiatives and further investments.

Snap-on is poised well, given its innovative hardware, particularly with the proprietary comprehensive database. The company is focused on customer connection and innovation. Management expects the vehicle repair market to be sturdy. The company has launched a lineup of hand tools focused on improving customer connection. With respect to the critical industries, increased torque product sales as well as activities in aviation and general industries seem encouraging.

The specialty torque business of SNA’s Commercial & Industrial Group is progressing well. The company has an array of new products including its heavy-duty cordless torque multiplier, known as the CTM 800, delivering torque from 160 footpounds. This tool has been expanding in torque. The CTM 800 torque packs a lot into a compact tool with versatility, safety, access, durability and precision. Such strengths are likely to bolster sales and profits.

Bumps in SNA’s Growth Trajectory

Snap-on remains prone to macroeconomic headwinds, including geographic challenges in critical industries. The company’s performance has been soft in various regions. Weak performance in China is acting as a deterrent. In addition, challenges in automotive remain concerning. 

Rising cost inflation, stemming from higher raw material expenses and other costs, is another headwind that is hurting SNA’s performance. In addition, the company has been witnessing higher operating expenses owing to increased personnel and other associated costs. Operating expenses rose 3.5% year over year. The metric, as a percentage of net sales, saw a rise of 90 basis points in the most recent quarter.

SNA Stock’s Valuation

Going by the price/earnings ratio, Snap-on stock is currently trading at 16.97 on a forward 12-month basis compared with 17.26 for the industry. The stock is trading lower than its five-year high of 18.63.

Conclusion

We note that SNA stock has been doing well for a while, recording a gain of 21% in the past six months compared with the industry’s 8.1% growth.

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Management expects SNA’s markets and operations to have considerable resilience against the uncertainties of the operating landscape. Snap-on anticipates continued progress by leveraging capabilities in the automotive repair arena, as well as expanding its customer base in automotive repair and across geographies, including critical industries. For 2025, SNA anticipates progress along its defined runways for growth.

The Zacks Consensus Estimate for SNA’s 2025 sales and earnings per share (EPS) indicates a rise of 2.9% and 1.4%, respectively, year over year. For 2026, the consensus mark for sales and EPS implies a jump of 4% and 6.8%, respectively, year over year. This highlights analysts’ confidence in this Zacks Rank #3 (Hold) stock.

Key Consumer Discretionary Picks

We have highlighted three better-ranked stocks, namely Ralph Lauren RL, Gildan Activewear GIL and Royal Caribbean RCL.

Ralph Lauren, a designer and distributor of premium lifestyle products, including apparel, accessories and footwear, currently carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. 

Ralph Lauren has a trailing four-quarter earnings surprise of 6.5%, on average. The Zacks Consensus Estimate for RL’s current financial-year sales indicates growth of 5.8% from the year-ago figure.

Gildan Activewear, a manufacturer of premium quality branded basic activewear, carries a Zacks Rank of 2 at present. GIL has a trailing four-quarter earnings surprise of 5.3%, on average. 

The consensus estimate for Gildan Activewear’s current financial-year EPS indicates growth of 4.4% from the year-ago figure.

Royal Caribbean, a cruise company, carries a Zacks Rank of 2 at present. RCL has a trailing four-quarter earnings surprise of 15.7%, on average.

The Zacks Consensus Estimate for RCL’s 2024 sales and EPS indicates an increase of 9.1% and 26.2%, respectively, from the year-ago levels.

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Snap-On Incorporated (SNA) : Free Stock Analysis Report

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Gildan Activewear, Inc. (GIL) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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