Key Takeaways
- Snap-on shares fell 3% today after third-quarter EPS of $4.64 and net sales of $1.18 billion both missed consensus estimates.
- The drop looks like a temporary hit: van franchisees cut inventory after a sharp rise in diesel prices, while the technicians who buy from them kept spending.
- Tools Group organic sales fell 7.0%, but Commercial & Industrial had a record quarter with organic sales up 7.4%.
- The next test is whether Tools Group sales recover once diesel prices settle and franchisees restock.
Snap-on (SNA) shares sank 3% today after the toolmaker’s third-quarter results missed Wall Street’s estimates on both lines.
Earnings of $4.64 per share missed the $4.93 consensus, and net sales of $1.18 billion fell short of the $1.24 billion expected. CEO Nick Pinchuk blamed diesel.
What exactly happened
Snap-on reported before Thursday’s open. By group:
- Tools Group: organic sales down 7.0%, operating margin down to 18.0% from 21.7%
- Repair Systems & Information: organic sales down 5.5%
- Commercial & Industrial: organic sales up 7.4%, operating margin up to 18.5% from 15.6%
Overall, organic sales fell 2.8%. Earnings per share fell from $5.02 a year ago, but last year’s figure included a $0.31 one-time gain from a legal settlement. Without it, earnings were down just 1.5%.
In Pinchuk’s words:
“The results were principally marked by the unprecedentedly accelerated rise in diesel prices, which in our mobile van channel prompted franchisees to reduce inventories despite very stable demand from their technician customers.”
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The mechanics kept buying
So the franchisees who sell Snap-on’s tools from their vans bought less from Snap-on, even as the mechanics buying from them kept spending. A franchisee can only run its shelves down so far while its customers keep buying.
And margins held up: gross margin was 51.0%, against 50.9% a year ago. Commercial & Industrial, led by gains in critical industries, posted what Pinchuk called a “record-setting performance,” with operating earnings up 30%.
The 5.5% drop in Repair Systems & Information is harder to pin on diesel. Snap-on put it down mainly to less business with automaker dealerships.
Analysts still see growth
Before the report, analysts expected normalized EPS to rise from $18.88 in fiscal 2025 to $19.81 this year and $21.46 in 2027…
This quarter likely trims the 2026 number. But if franchisees restock once diesel prices settle, 2027’s growth looks intact.
Nor is the stock priced for disaster. It traded at 18x forward earnings at yesterday’s close, and after today’s drop it’s closer to 17x, still above its five-year average of 16x.
My take: this looks like a temporary hit to the Tools Group, and I expect its sales to recover when franchisees restock. But at a premium to its usual multiple, I’d want to see that recovery start before buying.
Of course, if diesel prices keep climbing, franchisees could keep cutting into the fourth quarter, which Snap-on reports early next year.
So what is Snap-on stock actually worth?
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Disclaimer:
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