Analyst Sherif El-Sabbahy of Bank of America Securities reiterated a Sell rating on Snap-on (SNA – Research Report), with a price target of $273.00.
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Sherif El-Sabbahy has given his Sell rating due to a combination of factors affecting Snap-on’s performance, particularly in its Tools segment, which is the largest contributor to its revenue. Despite some growth in other segments like RS&I and C&I, the Tools division has experienced a decline in sales, with a 1.4% year-over-year drop, highlighting a persistent struggle even amidst easier comparisons. The shift towards lower-margin products has not compensated for the lack of organic growth, and there are concerns about elevated inventory levels if demand does not pick up in the coming quarters.
El-Sabbahy also points to a volatile environment for Tools and related financing, with rising delinquencies as an additional concern. While the company has managed to maintain margins through expansion in other areas, the ongoing challenges in the Tools market have led to a downward revision in revenue forecasts by 3%, affecting EBIT and EPS estimates. The price objective has been adjusted to $273, reflecting continued caution about a prolonged slowdown in the Tools market, hence the reiteration of an Underperform rating.