Snap-on Announces First Quarter 2024 Results

Rhea-AI Summary

Snap-on Incorporated (NYSE: SNA) announces first quarter 2024 results with diluted EPS of $4.91, a 6.7% increase from Q1 2023, and operating margin before financial services at 22.9%. Net sales of $1,182.3 million, a slight decrease from last year, with organic sales decline partially offset by acquisition-related sales and favorable foreign currency translation. Financial services revenue and operating earnings also saw growth compared to 2023.

Positive

• Diluted EPS increased by 6.7% from Q1 2023 to $4.91.
• Operating margin before financial services improved to 22.9% from 22.0% in Q1 2023.
• Net sales of $1,182.3 million in Q1 2024, with a slight decrease from the previous year.
• Organic sales declined by 0.8%, offset by acquisition-related sales and favorable foreign currency translation.
• Financial services revenue increased to $99.6 million from $92.6 million in 2023.
• Operating earnings before financial services grew to $270.9 million from $259.8 million in 2023.
• Consolidated operating earnings reached $339.2 million, or 26.5% of revenues, compared to $326.1 million, or 25.6% of revenues, in 2023.
• Net earnings for the quarter were $263.5 million, or $4.91 per diluted share, up from $248.7 million, or $4.60 per diluted share, in 2023.
• The effective income tax rate decreased to 22.2% in 2024 from 23.1% in 2023.

Negative

• None.

Insights

Financial Analyst

Examining the financial performance of Snap-on Incorporated reveals an interesting landscape. The slight increase in diluted earnings per share (EPS) to $4.91 from $4.60 is notable, especially considering that part of this growth stems from a one-time legal payment. While this inflates the EPS, it's a non-recurring event and investors should not expect such boosts regularly.

The company's operating margin improvement to 22.9% from 22.0% is a positive signal of operational efficiency. However, the near-flat sales year-over-year, with a slight decline of 0.1%, coupled with an organic sales drop of 0.8%, might raise concerns about the company's growth trajectory in an otherwise stable economy. The modest increase in financial services revenue and operating earnings is a silver lining, indicating robustness in this segment.

Furthermore, the effective income tax rate has decreased slightly, which positively impacts net earnings. However, investors should discern between the increase in net earnings driven by operational performance and that due to transient tax benefits or legal settlements.

Market Research Analyst

In the context of the broader market, Snap-on's performance should be read with both caution and optimism. A stagnant sales figure in a growth-oriented market may signal the need to innovate or expand market reach. The reliance on acquisitions and favorable currency translations to counterbalance organic sales decline could be seen as a red flag for sustainability of revenue growth.

Additionally, the operating margin increment may reflect well on cost management, but it should be scrutinized alongside sales figures to ensure it's not solely a result of cost-cutting measures which might affect long-term growth and market competitiveness. Investors will want to consider how these factors play into the company's ability to maintain and increase its market share, especially against the backdrop of a fiercely competitive tools and equipment sector.

Diluted EPS of $4.91, including a $0.16 per share benefit from a legal payment, compares to $4.60 in Q1 2023;

Operating margin before financial services of 22.9% compares to 22.0% in Q1 2023; Sales of $1,182.3 million consistent with last year

KENOSHA, Wis.--(BUSINESS WIRE)-- Snap-on Incorporated (NYSE: SNA), a leading global innovator, manufacturer and marketer of tools, equipment, diagnostics, repair information and systems solutions for professional users performing critical tasks, today announced operating results for the first quarter of 2024.

• Net sales of $1,182.3 million in the first quarter of 2024 represented a decrease of $0.7 million, or 0.1%, from 2023 levels, reflecting a $9.9 million, or 0.8%, organic sales decline, partially offset by $6.7 million of acquisition-related sales and $2.5 million of favorable foreign currency translation.
• Operating earnings before financial services for the quarter of $270.9 million compared to $259.8 million in 2023. As a percentage of net sales, operating earnings before financial services were 22.9% in the first quarter compared to 22.0% last year.
• Financial services revenue in the quarter of $99.6 million compared to $92.6 million in 2023; financial services operating earnings of $68.3 million compared to $66.3 million last year.
• Consolidated operating earnings for the quarter of $339.2 million, or 26.5% of revenues (net sales plus financial services revenue), compared to $326.1 million, or 25.6% of revenues, last year.
• The first quarter effective income tax rate was 22.2% in 2024 and 23.1% in 2023.
• Net earnings in the quarter of $263.5 million, or $4.91 per diluted share, compared to net earnings of $248.7 million, or $4.60 per diluted share, a year ago.
• In the quarter, operating earnings before financial services and consolidated operating earnings included an $11.3 million benefit for payments received associated with a legal matter (the “legal payment”); net earnings included an $8.8 million, or $0.16 per diluted share, after-tax benefit from the legal payment.

See “Non-GAAP Measures” below for a definition of, and further explanation about, organic sales.

“We’re encouraged by our first quarter 2024 results, achieved against the general uncertainty and turbulence of this time,” said Nick Pinchuk, Snap-on chairman and chief executive officer. “Despite the varying levels of confidence among technicians served through our Snap-on Tools franchised van channel, we believe our growth with customers in critical industries and with repair shop owners and managers demonstrates the broad strength of our individual operations, the resilience of our multiple markets, and the substantial opportunities along our runways for growth. As we move forward, we’ll continue pivoting our focus to match technician preferences in this period, we’ll maintain our momentum with repair shops and with critical industries, and we’ll reinforce our brand with significant new products. In addition, we’ll remain engaged in our Snap-on Value Creation Processes to maximize capacity for ongoing advancement, resisting and overcoming the headwinds of the day. Finally, the power of our enterprise is dependent on the experience and capability of Snap-on people worldwide. I want to thank both our franchisees and our associates for their valuable contributions to our company, for their steadfast dedication to our team, and for their unshakable belief in our future.”

Segment Results

Commercial & Industrial Group segment sales of $359.9 million in the quarter compared to $363.8 million last year, reflecting a $9.2 million, or 2.5%, organic sales decline and $1.4 million of unfavorable foreign currency translation, partially offset by $6.7 million of acquisition-related sales. The organic decrease is primarily due to declines in both the segment’s power tools and Asia-Pacific operations, partially offset by higher activity with customers in critical industries.

Operating earnings of $55.4 million in the period compared to $55.8 million in 2023. The operating margin (operating earnings as a percentage of segment sales) of 15.4% compared to 15.3% last year.

Snap-on Tools Group segment sales of $500.1 million in the quarter compared to $537.0 million last year, reflecting a $37.5 million, or 7.0%, organic sales decline, partially offset by $0.6 million of favorable foreign currency translation. The organic decrease is due to lower activity in the U.S. operations, partially offset by higher sales in the segment’s international operations.

Operating earnings of $117.3 million in the period compared to $131.7 million in 2023. The operating margin of 23.5% compared to 24.5% a year ago.

Repair Systems & Information Group segment sales of $463.8 million in the quarter compared to $446.6 million last year, reflecting a $14.7 million, or 3.3%, organic sales increase and $2.5 million of favorable foreign currency translation. The organic gain includes increased activity with OEM dealerships and higher sales of undercar equipment.

Operating earnings of $112.9 million in the period compared to $104.6 million in 2023. The operating margin improved 90 basis points to 24.3% in the quarter from 23.4% last year.

Financial Services operating earnings of $68.3 million on revenue of $99.6 million in the quarter compared to operating earnings of $66.3 million on revenue of $92.6 million a year ago. Originations of $301.7 million in the first quarter represented an increase of $0.8 million, or 0.3%, from 2023 levels.

Corporate expenses in the first quarter of $14.7 million, including a benefit from the legal payment, compared to $32.3 million last year.

Outlook

We believe that our markets and our operations possess and have demonstrated continuing and considerable resilience against the uncertainties of the current environment. In 2024, Snap-on expects to make ongoing progress 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, we project that capital expenditures in 2024 will be in the range of $100 million to $110 million, of which $21.8 million was incurred in the first three months of the year.

Snap-on currently anticipates that its full-year 2024 effective income tax rate will be in the range of 22% to 23%.

Conference Call and Webcast on April 18, 2024, at 9:00 a.m. Central Time

A discussion of this release will be webcast on Thursday, April 18, 2024, at 9:00 a.m. Central Time, and a replay will be available for at least 10 days following the call. To access the webcast, visit https://www.snapon.com/EN/Investors/Investor-Events and click on the link to the call. The slide presentation accompanying the call can be accessed under the Downloads tab in the webcast viewer, as well as on the Snap-on website at https://www.snapon.com/EN/Investors/Financial-Information/Quarterly-Earnings.

Non-GAAP Measures

References in this release to “organic sales” refer to sales from continuing operations calculated in accordance with generally accepted accounting principles in the United States (“GAAP”), adjusted to exclude acquisition-related sales and the impact of foreign currency translation. Management evaluates the company’s sales performance based on organic sales growth, which primarily reflects growth from the company’s existing businesses as a result of increased output, expanded customer base, geographic expansion, new product development and pricing changes, and excludes sales contributions from acquired operations the company did not own as of the comparable prior-year reporting period. Organic sales also exclude the effects of foreign currency translation as foreign currency translation is subject to volatility that can obscure underlying business trends. Management believes that the non-GAAP financial measure of organic sales is meaningful to investors as it provides them with useful information to aid in identifying underlying growth trends in the company’s businesses and facilitates comparisons of its sales performance with prior periods.

About Snap-on

Snap-on Incorporated is a leading global innovator, manufacturer, and marketer of tools, equipment, diagnostics, repair information and systems solutions for professional users performing critical tasks including those working in vehicle repair, aerospace, the military, natural resources, and manufacturing. From its founding in 1920, Snap-on has been recognized as the mark of the serious and the outward sign of the pride and dignity working men and women take in their professions. Products and services are sold through the company’s network of widely recognized franchisee vans, as well as through direct and distributor channels, under a variety of notable brands. The company also provides financing programs to facilitate the sales of its products and to support its franchise business. Snap-on, an S&P 500 company, generated sales of $4.7 billion in 2023, and is headquartered in Kenosha, Wisconsin.

Forward-looking Statements

Statements in this news release that are not historical facts, including statements that (i) are in the future tense; (ii) include the words “expects,” “anticipates,” “intends,” “approximates,” or similar words that reference Snap-on or its management; (iii) are specifically identified as forward-looking; or (iv) describe Snap-on’s or management’s future outlook, plans, estimates, objectives or goals, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Snap-on cautions the reader that this news release may contain statements, including earnings projections, that are forward-looking in nature and were developed by management in good faith and, accordingly, are subject to risks and uncertainties regarding Snap-on’s expected results that could cause (and in some cases have caused) actual results to differ materially from those described or contemplated in any forward-looking statement. Factors that may cause the company’s actual results to differ materially from those contained in the forward-looking statements include those found in the company’s reports filed with the Securities and Exchange Commission, including the information under the “Safe Harbor” and “Risk Factors” headings in its Annual Report on Form 10-K for the fiscal year ended December 30, 2023, which are incorporated herein by reference. Snap-on disclaims any responsibility to update any forward-looking statement provided in this news release, except as required by law.

For additional information, please visit www.snapon.com.

SNAP-ON INCORPORATED Condensed Consolidated Statements of Earnings (Amounts in millions, except per share data) (unaudited)
	Three Months Ended
	March 30,				April 1,
	2024				2023
Net sales	$	1,182.3			$	1,183.0
Cost of goods sold		(585.6	)			(593.4	)
Gross profit		596.7				589.6
Operating expenses		(325.8	)			(329.8	)
Operating earnings before financial services		270.9				259.8
Financial services revenue		99.6				92.6
Financial services expenses		(31.3	)			(26.3	)
Operating earnings from financial services		68.3				66.3
Operating earnings		339.2				326.1
Interest expense		(12.5	)			(12.4	)
Other income (expense) – net		18.1				15.2
Earnings before income taxes		344.8				328.9
Income tax expense		(75.2	)			(74.6	)
Net earnings		269.6				254.3
Net earnings attributable to noncontrolling interests		(6.1	)			(5.6	)
Net earnings attributable to Snap-on Inc.	$	263.5			$	248.7
Net earnings per share attributable to Snap-on Inc.:
Basic	$	4.99			$	4.69
Diluted		4.91				4.60
Weighted-average shares outstanding:
Basic		52.8				53.0
Effect of dilutive securities		0.9				1.1
Diluted		53.7				54.1

SNAP-ON INCORPORATED Supplemental Segment Information (Amounts in millions) (unaudited)
	Three Months Ended
	March 30,				April 1,
	2024				2023
Net sales:
Commercial & Industrial Group	$	359.9			$	363.8
Snap-on Tools Group		500.1				537.0
Repair Systems & Information Group		463.8				446.6
Segment net sales		1,323.8				1,347.4
Intersegment eliminations		(141.5	)			(164.4	)
Total net sales		1,182.3				1,183.0
Financial Services revenue		99.6				92.6
Total revenues	$	1,281.9			$	1,275.6
Operating earnings:
Commercial & Industrial Group	$	55.4			$	55.8
Snap-on Tools Group		117.3				131.7
Repair Systems & Information Group		112.9				104.6
Financial Services		68.3				66.3
Segment operating earnings		353.9				358.4
Corporate		(14.7	)			(32.3	)
Operating earnings		339.2				326.1
Interest expense		(12.5	)			(12.4	)
Other income (expense) – net		18.1				15.2
Earnings before income taxes	$	344.8			$	328.9

SNAP-ON INCORPORATED Condensed Consolidated Balance Sheets (Amounts in millions) (unaudited)
	March 30,				December 30,
	2024				2023
Assets
Cash and cash equivalents	$	1,121.0			$	1,001.5
Trade and other accounts receivable – net		827.5				791.3
Finance receivables – net		604.9				594.1
Contract receivables – net		116.6				120.8
Inventories – net		970.5				1,005.9
Prepaid expenses and other current assets		135.6				138.4
Total current assets		3,776.1				3,652.0
Property and equipment – net		534.7				539.3
Operating lease right-of-use assets		74.4				74.7
Deferred income tax assets		78.4				76.0
Long-term finance receivables – net		1,290.6				1,284.2
Long-term contract receivables – net		413.6				407.9
Goodwill		1,071.3				1,097.4
Other intangible assets – net		277.7				268.9
Pension assets		130.4				130.5
Other long-term assets		19.6				14.0
Total assets	$	7,666.8			$	7,544.9
Liabilities and Equity
Notes payable	$	15.2			$	15.6
Accounts payable		257.4				238.0
Accrued benefits		70.5				64.4
Accrued compensation		67.9				102.9
Franchisee deposits		73.7				73.3
Other accrued liabilities		505.0				447.4
Total current liabilities		989.7				941.6
Long-term debt		1,184.9				1,184.6
Deferred income tax liabilities		88.3				79.2
Retiree health care benefits		21.2				21.8
Pension liabilities		75.3				82.3
Operating lease liabilities		54.5				54.6
Other long-term liabilities		89.6				87.4
Total liabilities		2,503.5				2,451.5
Equity
Shareholders' equity attributable to Snap-on Inc.
Common stock		67.5				67.5
Additional paid-in capital		527.4				545.5
Retained earnings		7,113.1				6,948.5
Accumulated other comprehensive loss		(493.3	)			(449.5	)
Treasury stock at cost		(2,073.7	)			(2,040.7	)
Total shareholders' equity attributable to Snap-on Inc.		5,141.0				5,071.3
Noncontrolling interests		22.3				22.1
Total equity		5,163.3				5,093.4
Total liabilities and equity	$	7,666.8			$	7,544.9

SNAP-ON INCORPORATED Condensed Consolidated Statements of Cash Flows (Amounts in millions) (unaudited)
	Three Months Ended
	March 30,				April 1,
	2024				2023
Operating activities:
Net earnings	$	269.6			$	254.3
Adjustments to reconcile net earnings to net cash provided (used) by operating activities:
Depreciation		18.2				18.0
Amortization of other intangible assets		6.3				6.9
Provision for losses on finance receivables		18.2				14.2
Provision for losses on non-finance receivables		4.9				5.0
Stock-based compensation expense		9.8				10.2
Deferred income tax provision (benefit)		1.6				(0.2	)
Gain on sales of assets		(0.2	)			(0.2	)
Changes in operating assets and liabilities, net of effects of acquisitions:
Trade and other accounts receivable		(47.9	)			(22.9	)
Contract receivables		(4.0	)			0.2
Inventories		22.1				(13.2	)
Prepaid expenses and other current assets		(3.5	)			1.7
Accounts payable		23.3				(0.5	)
Accrued and other liabilities		30.3				28.1
Net cash provided by operating activities		348.7				301.6
Investing activities:
Additions to finance receivables		(248.0	)			(257.1	)
Collections of finance receivables		207.8				207.5
Capital expenditures		(21.8	)			(23.0	)
Disposals of property and equipment		1.1				0.5
Other		(2.3	)			(0.8	)
Net cash used by investing activities		(63.2	)			(72.9	)
Financing activities:
Net increase (decrease) in other short-term borrowings		(0.4	)			0.8
Cash dividends paid		(98.2	)			(86.1	)
Purchases of treasury stock		(70.2	)			(87.2	)
Proceeds from stock purchase plan and stock option exercises		28.3				32.8
Other		(23.7	)			(12.4	)
Net cash used by financing activities		(164.2	)			(152.1	)
Effect of exchange rate changes on cash and cash equivalents		(1.8	)			—
Increase in cash and cash equivalents		119.5				76.6
Cash and cash equivalents at beginning of year		1,001.5				757.2
Cash and cash equivalents at end of period	$	1,121.0			$	833.8
Supplemental cash flow disclosures:
Cash paid for interest	$	(13.7	)		$	(13.6	)
Net cash paid for income taxes		(14.7	)			(13.3	)

Non-GAAP Supplemental Data

The following non-GAAP supplemental data is presented for informational purposes to provide readers with insight into the information used by management for assessing the operating performance of Snap-on Incorporated's ("Snap-on") non-financial services ("Operations") and Financial Services businesses.

The supplemental Operations data reflects the results of operations and financial position of Snap-on's tools, diagnostics, equipment products, software and other non-financial services operations with Financial Services presented on the equity method. The supplemental Financial Services data reflects the results of operations and financial position of Snap-on's U.S. and international financial services operations. The financing needs of Financial Services are met through intersegment borrowings and cash generated from Operations; Financial Services is charged interest expense on intersegment borrowings at market rates. Income taxes are charged to Financial Services on the basis of the specific tax attributes generated by the U.S. and international financial services businesses. Transactions between the Operations and Financial Services businesses are eliminated to arrive at the Condensed Consolidated Financial Statements.

SNAP-ON INCORPORATED Non-GAAP Supplemental Consolidating Data - Supplemental Condensed Statements of Earnings (Amounts in millions) (unaudited)
	Operations*								Financial Services
	Three Months Ended								Three Months Ended
	March 30,				April 1,				March 30,				April 1,
	2024				2023				2024				2023
Net sales	$	1,182.3			$	1,183.0			$	—			$	—
Cost of goods sold		(585.6	)			(593.4	)			—				—
Gross profit		596.7				589.6				—				—
Operating expenses		(325.8	)			(329.8	)			—				—
Operating earnings before financial services		270.9				259.8				—				—
Financial services revenue		—				—				99.6				92.6
Financial services expenses		—				—				(31.3	)			(26.3	)
Operating earnings from financial services		—				—				68.3				66.3
Operating earnings		270.9				259.8				68.3				66.3
Interest expense		(12.5	)			(12.4	)			—				—
Intersegment interest income (expense) – net		16.7				15.7				(16.7	)			(15.7	)
Other income (expense) – net		18.0				15.2				0.1				—
Earnings before income taxes and equity earnings		293.1				278.3				51.7				50.6
Income tax expense		(62.3	)			(61.5	)			(12.9	)			(13.1	)
Earnings before equity earnings		230.8				216.8				38.8				37.5
Financial services – net earnings attributable to Snap-on		38.8				37.5				—				—
Net earnings		269.6				254.3				38.8				37.5
Net earnings attributable to noncontrolling interests		(6.1	)			(5.6	)			—				—
Net earnings attributable to Snap-on	$	263.5			$	248.7			$	38.8			$	37.5
* Snap-on with Financial Services presented on the equity method.

SNAP-ON INCORPORATED Non-GAAP Supplemental Consolidating Data - Supplemental Condensed Balance Sheets (Amounts in millions) (unaudited)
	Operations*						Financial Services
	March 30,			December 30,			March 30,			December 30,
	2024			2023			2024			2023
Assets
Cash and cash equivalents	$	1,120.9		$	1,001.3		$	0.1		$	0.2
Intersegment receivables		18.6			15.7			—			—
Trade and other accounts receivable – net		826.7			790.6			0.8			0.7
Finance receivables – net		—			—			604.9			594.1
Contract receivables – net		5.1			5.5			111.5			115.3
Inventories – net		970.5			1,005.9			—			—
Prepaid expenses and other current assets		140.0			143.2			8.3			7.4
Total current assets		3,081.8			2,962.2			725.6			717.7
Property and equipment – net		532.2			536.5			2.5			2.8
Operating lease right-of-use assets		73.6			73.8			0.8			0.9
Investment in Financial Services		395.5			393.9			—			—
Deferred income tax assets		53.0			51.3			25.4			24.7
Intersegment long-term notes receivable		792.8			785.6			—			—
Long-term finance receivables – net		—			—			1,290.6			1,284.2
Long-term contract receivables – net		8.1			8.3			405.5			399.6
Goodwill		1,071.3			1,097.4			—			—
Other intangible assets – net		277.7			268.9			—			—
Pension assets		130.4			130.5			—			—
Other long-term assets		36.6			30.2			0.2			0.1
Total assets	$	6,453.0		$	6,338.6		$	2,450.6		$	2,430.0
Liabilities and Equity
Notes payable	$	15.2		$	15.6		$	—		$	—
Accounts payable		256.7			236.2			0.7			1.8
Intersegment payables		—			—			18.6			15.7
Accrued benefits		70.5			64.4			—			—
Accrued compensation		66.0			99.9			1.9			3.0
Franchisee deposits		73.7			73.3			—			—
Other accrued liabilities		480.2			432.2			37.5			27.4
Total current liabilities		962.3			921.6			58.7			47.9
Long-term debt and intersegment long-term debt		—			—			1,977.7			1,970.2
Deferred income tax liabilities		88.3			79.2			—			—
Retiree health care benefits		21.2			21.8			—			—
Pension liabilities		75.3			82.3			—			—
Operating lease liabilities		54.1			54.0			0.4			0.6
Other long-term liabilities		88.5			86.3			18.3			17.4
Total liabilities		1,289.7			1,245.2			2,055.1			2,036.1
Total shareholders' equity attributable to Snap-on		5,141.0			5,071.3			395.5			393.9
Noncontrolling interests		22.3			22.1			—			—
Total equity		5,163.3			5,093.4			395.5			393.9
Total liabilities and equity	$	6,453.0		$	6,338.6		$	2,450.6		$	2,430.0
* Snap-on with Financial Services presented on the equity method.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240418703474/en/

Investors:

Sara Verbsky

262/656-4869

Media:

Samuel Bottum

262/656-5793

Source: Snap-on Incorporated

FAQ

What is Snap-on's diluted EPS for the first quarter of 2024?

Snap-on's diluted EPS for Q1 2024 was $4.91, a 6.7% increase from Q1 2023.

How did Snap-on's net sales in the first quarter of 2024 compare to 2023?

Snap-on's net sales of $1,182.3 million in Q1 2024 represented a slight decrease of 0.1% from 2023 levels.

What was the operating margin before financial services for Snap-on in the first quarter of 2024?

Snap-on's operating margin before financial services was 22.9% in Q1 2024, an improvement from 22.0% in Q1 2023.

How did Snap-on's financial services revenue in the first quarter of 2024 compare to 2023?

Snap-on's financial services revenue in Q1 2024 increased to $99.6 million from $92.6 million in 2023.

What was the effective income tax rate for Snap-on in the first quarter of 2024?

Snap-on's effective income tax rate was 22.2% in Q1 2024, down from 23.1% in Q1 2023.