Snap-on Down More Than 22% In 6 Months: Can The Stock Revive?

Snap-on Incorporated (NYSE:SNA) stock has been struggling due to sluggishness in its Tools Group division, mainly owing to lower sales at the international franchise business. Volatility in raw-material prices and stiff competition are additional woes. These headwinds, along with negative currency translations, impacted the company’s top line in third-quarter 2018.

Consequently, shares of Snap-on dipped 22.3% in the past three months, underperforming the industry’s decline of 19.9%.

Although these above-mentioned hurdles remain a matter of concern, the company is leaving no stone unturned to revive its stock performance. Let’s delve deeper.

Efforts to Revive the Stock

Snap-on’s stock has the potential to return to growth supported by its business model, which helps in enhancing the value-creation processes. This, in turn, improves safety, quality of service, customer satisfaction and innovation. The company’s growth strategy focuses on three critical areas, namely enhancing the franchise network, improving relationship with repair shop owners and managers, and expanding critical industries in emerging markets.

Snap-on is dedicated toward various strategic principles and processes aimed at creating value in areas like Rapid Continuous Improvement (RCI). Notably, the RCI process is designed to enhance organizational effectiveness and minimize costs, besides helping Snap-on boost sales and margins, and generate savings. Moreover, management intends to boost customer services, along with enhancing manufacturing and supply-chain capabilities, through the RCI initiatives and further investments.

Furthermore, the company is actively pursuing strategic acquisitions to strengthen its portfolio. In 2017, the company bought Torque Control Specialists Pty Ltd that is boosting the company’s Commercial & Industrial Group segment’s results. Some other buyouts include Norbar Torque Tools Holdings Limited, BTC Global Limited, Ryeson Corporation, Car-O-Liner Holding and Ecotechnics, which are contributing to the company’s top line. In third-quarter 2018, sales generated from acquisitions totaled $1.4 million, including the Norbar operations and FASTORQ business.

Apart from these, Snap-on’s focus on product innovation has been contributing to sales growth over the last few quarters. The company also remains poised on investing in new products and increasing brand awareness across the world. In this regard, it launched a number of products across its segments over the past few quarters, which have been driving the quarterly results.

Backed by robust business model and focus on value-creation, Snap-on boasts an impressive earnings surprise trend that continued in third-quarter 2018. Gains from acquisitions, broad-based strength in the Commercial & Industrial Group division and increased sales in the U.S. franchise operations were other drivers. Going ahead, management expects to continue with these encouraging prospects in 2018. Furthermore, the company’s VGM score of B reflects analysts’ optimism on the stock.

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