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Though the transition of the automobile industry to electric vehicles (EVs) further weighs the stock down, it also creates new demand for EV-specific equipment. While the trailing-twelve-months (TTM) number of vehicle miles traveled rose from 2.8 million in February 2021 to 3.0 million in July 2021, the TTM vehicle miles traveled is still 7% below pre-pandemic levels. Lower sales to the military, aerospace industry, and natural resources industry partially offset the rise in sales from technical education, heavy duty, and general industry customers.ĭriving demand still hasn't recovered to pre-pandemic levels, which is not good news for a company with large exposure to the automotive industry. Though the company saw strong revenue growth overall in 3Q21, not every segment saw positive trends. What's Not Working: Faster revenue growth in the company's lower-margin undercar equipment drove Snap-on's operating margin down from 19.7% in 3Q20 to 19.4% in 3Q21. global automotive diagnostics: 11% compounded annually from 2021 to 2030 according to Allied Market Research.global power tools: 6% compounded annually from 2021 to 2025 according to Global Market Insights.global hand tools and woodworking tools: 4% compounded annually from 2021 to 2026 according to ResearchAndMarkets.The following is a list of market growth forecasts corresponding to Snap-on's core operations from various research providers: Over the long term, the company's core operations are positioned in markets that have strong growth projections.

#SNAP ON TOOLS DRIVER#

Snap-on is already meeting this demand by offering diagnostic platforms that give repair shops the ability to make manufacturer-compliant calibrations to driver assistance systems. The proliferation of driver assistance systems provides more runway for Snap-on's diagnostic segment over the long run as demand for third-party repairs and system calibrations rise. The average age of a vehicle in 2021 of 12.1 years is up from 11.9 years in 2020. has steadily increased, which creates more repair opportunities for service providers. For years, the average age of vehicles on the road in the U.S.

Snap-on benefits from long-term demand in the automotive repair industry as it supplies auto service technicians, auto service centers, and car dealerships with tools, equipment, and diagnostic tools. Management spoke to the company's advantageous supply chain position in its 3Q21 earnings call when it mentioned that its vertically integrated business, 'certainly puts us in a better position to grow and probably capture new customers who might not be serviced by these people (i.e. Snap-on's available inventory during the supply crunch is an advantage that will help the company keep existing customers and effectively compete for new ones as other tool and equipment suppliers struggle to maintain desired inventory levels. While other businesses with more complex supply chains may struggle to maintain inventory levels, Snap-on's vertically integrated business enables it to better navigate the current global challenges. The company's Commercial and Industrial segment (30% of revenue in 3Q21), which expands its offerings beyond traditional auto tools and into the aerospace, power generation, and military markets, also showed signs of continued recovery from the pandemic as the segment's revenue was up 11% YoY from 3Q20. Total revenue in 3Q21 rose 10% year-over-year (YoY) and is 15% above 3Q19 levels.

What's Working: Snap-on beat on both its top and bottom lines in 3Q21. Sources: New Constructs, LLC and company filings

However, given the company's strong market position and cheap valuation, we continue to see upside in the stock.įigure 1: Long Idea Performance: From Date of Publication Through We made Snap-on a Long Idea in February 2018 and the stock has underperformed the market by 39% since then. Snap-on ( NYSE: SNA) remains a Long Idea after 3Q21 earnings. With deep customer relationships and innovative solutions for future equipment needs, this global supplier has a durable business ready for a changing industry. Alacatr/iStock Unreleased via Getty Images

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