SNA - Embedded Expectations Analysis - 2021 04 06
Snap-on Incorporated (SNA:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) earnings, with a 17.9x Uniform P/E. At these levels, the market is pricing in bearish expectations for the firm, and management may have concerns about capacity expansion projects, gross margins, and their RS&I businessSpecifically, management may lack confidence in their ability to expand their advantage in products focused on critical tasks, sustain their financial services EPS performance, and invest in capacity expansion projects. In addition, they may have concerns about the pace of the psychological recovery from the pandemic, the capacity of their Tools Group franchisees, and earnings dilution from volume improvement across lower-margin OEM project sales. Furthermore, they may be overstating the capabilities of their diagnostics and repair information products and the strength of their Repair Systems & Information (RS&I) business. Management may also lack confidence in their ability to maintain gross margins and sustain their free cash flow performance. Finally, they may have concerns about delinquency rates for their Extended Credit (EC) programs, the lasting impact of the recession, and increases in restructuring charges
Snap-on is a manufacturer and marketer of tools, equipment, diagnostics, repair information and systems solutions. Products and services include hand and power tools, tool storage, diagnostics software, handheld and PC-based diagnostic products, information and management systems, shop equipment and other solutions for vehicle dealerships and repair centers, as well as for customers in industries, such as aviation and aerospace, agriculture, construction, government and military, mining, natural resources, power generation and technical education. The company also provides financing programs designed to facilitate the sales of its products and support its franchise business.
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