Snap-on Earnings: Tariff-Related Uncertainty Weighs on Repair Technicians’ Sentiment

Key Morningstar Metrics for Snap-on

• Fair Value Estimate: $236.00
• Morningstar Rating: ★
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: Medium

What We Thought of Snap-on’s Earnings

Snap-on SNA posted disappointing first-quarter results, as its GAAP EPS of $4.51 fell $0.32 short of the FactSet consensus estimate, sending shares down by around 8% in intraday trading on April 17. We’ve lowered our fair value estimate to $236 per share from $240, which reflects our more muted near-term outlook due to uncertainty around tariffs, partially offset by time value of money.

Snap-on’s first-quarter organic sales decreased by 2.3% from the prior-year period, as a 2.9% decline in commercial and industrial and a 6.8% decline in the tools segment were partially offset by a 3.7% increase in repair systems and information. The latter continued to benefit from strong OEM dealership activity as well as diagnostic and repair information products, partially offset by softer undercar equipment activity. Commercial and industrial faced lower sales in the military end market, as well as a decline in the European hand tools business. The decrease in the tools segment was primarily driven by a high-single-digit year-over-year decline in the United States.

Our long-term outlook for Snap-on remains largely unchanged, as we continue to think the company is poised to benefit from growing demand for repair tools, driven by an aging car parc and rising vehicle complexity. Nonetheless, given uncertainty around tariffs, we see the risk/reward proposition as skewed to the downside in the near term. Snap-on mostly manufactures in the regions where it sells, which we think will help limit the direct impact of tariffs, but we expect the challenging macroeconomic environment to weigh on consumer sentiment.

Uncertainty around tariffs has made repair technicians even more hesitant to purchase big-ticket items, instead pivoting to tools with shorter payback periods. Despite the recent pullback, Snap-on’s shares remain roughly 30% overvalued, so we would prefer to wait for a more attractive entry point.