Snap-on Inc. (SNA) posted lackluster third quarter results before the opening bell today as the company’s European operations and Financial Services segment adversely affected performance.
The Kenosha, WI-based company’s earnings plunged 53.5% year over year to $25.4 million, or 44 cents per share, missing the Zacks Consensus Estimate by 5 cents. Total sales slipped 16.6% year over year to $581.8 million, with adverse foreign currency translations contributing 3% of the decrease.
Commercial & Industrial Group segment sales fell 21.5% year over year to $265.4 million; excluding foreign currency translation, sales fell 17.2%. Operating earnings slipped $29.8 million from the prior year quarter to $10.9 million. The decline was caused by lower sales, particularly in Europe, coupled with the company’s inventory reduction efforts. Moreover, performance was also affected by $4.5 million of restructuring costs associated with operations in Europe.
Snap-on Tools Group segment sales contracted 8.5% year over year to $246.6 million in the quarter; excluding foreign currency translation, sales fell 7.1%. However, operating earnings grew 8.5% to $30.6 million driven by management’s cost reduction and inventory management efforts.
Diagnostics & Information Group segment sales declined 14.9% year over year to $132 million; excluding foreign currency translation, sales fell 12.6% on account of a decrease in sales to Original Equipment Manufacturer (OEM) dealerships. Despite sluggish sales, operating earnings grew 17.6% to $32 million primarily due to sales of higher-margin diagnostics and software products, as well as the company’s cost management initiatives.
Financial Services revenue plunged 66.7% year over year to $6 million as the company terminated its financial services operating agreement with the CIT Group Inc. (CIT) earlier in the quarter. The company recorded an operating loss of $5.3 million in the segment, compared to an operating profit of $4.8 million in the year-ago period. The company expects to record an operating loss of $3 million to $5 million in this segment during the fourth quarter.
Snap-on ended the quarter with cash and cash equivalents of $709 million, compared to $118.3 million in the prior year quarter. During the first 9 months, the company raised $545.9 million from the issuance of long-term notes, and its total long-term debt outstanding at the end of the quarter was $902.4 million.
Looking ahead, Snap-on continues to move forward with its planned investments in China and Eastern Europe despite macroeconomic headwinds. Capital expenditures for the full-year are expected between $60 million and $70 million.
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