Snap On Earnings: Profit Falls, SNAPing Streak of Rising Profits

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S&P 500 (NYSE:SPY) component Snap On Inc. (NYSE:SNA) reported its results for the second quarter. Snap-on is a global innovator, manufacturer and marketer of tools, diagnostics, equipment, software and service solutions.

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Snap On Inc. Earnings Cheat Sheet

Results: Net income for Snap On Inc. fell to $76.4 million ($1.30 per share) vs. $78 million ($1.33 per share) a year earlier. This is a decline of 2.1% from the year-earlier quarter.

Revenue: Rose 1.5% to $737.9 million from the year-earlier quarter.

Actual vs. Wall St. Expectations: Snap On Inc. beat the mean analyst estimate of $1.20 per share. It fell short of the average revenue estimate of $767.8 million.

Quoting Management: “We’re encouraged by our second quarter 2012 results, which we believe validate the strength of Snap-on’s ability to serve ‘the serious’ – professionals performing critical tasks where the costs and penalties for failure can be high,” said Nick Pinchuk, Snap-on chairman and chief executive officer. “We believe the organic sales increase, achieved despite uncertainties surrounding the global macroeconomic environment, particularly in Europe, illustrates ongoing advancements along our defined runways for coherent growth: enhancing the franchise network, expanding in the vehicle repair garage, extending into critical industries, and building in emerging markets. At the same time, we believe the continuing operating margin improvements are a clear reflection of our Snap-on Value Creation Processes and their positive contributions to our enterprise. Finally, I note that the second quarter results and our favorable trends are due to the dedication and efforts of our franchisees and associates worldwide; I thank them for their ongoing support and commitment.”

Key Stats:

Last quarter’s profit decreases breaks a four-quarter run of profit increases. In the first quarter, net income rose 26.3% from the year earlier, while the figure increased 28.3% in the fourth quarter of the last fiscal year, 45.8% in the third quarter of the last fiscal year and 72.2% in the second quarter of the last fiscal year.

The company has now surpassed analyst estimates for four quarters in a row. It beat the mark by 5 cents in the first quarter, by 10 cents in the fourth quarter of the last fiscal year, and by 15 cents in the third quarter of the last fiscal year.

Revenue has risen for the last four quarters. Revenue increased 6% to $735.2 million in the first quarter. The figure rose 12.3% in the fourth quarter of the last fiscal year from the year earlier and climbed 4% in the third quarter of the last fiscal year from the year-ago quarter.

Margins were up in the first quarter, following a drop in the previous quarter. Gross margin grew 0.3 percentage point from the year-earlier quarter to 47.4%. In the fourth quarter of the last fiscal year, the figure rose 0.4 percentage point to 47.3% from the year earlier quarter.

Looking Forward: For next quarter, analysts have a more positive outlook about the company’s expected results. The average estimate for the third quarter is $1.23 per share, up from $1.21 ninety days ago. For the fiscal year, the average estimate has moved up from $4.96 a share to $5.03 over the last ninety days.

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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