Is It Time To Snap Up Some Snap-on? Shares of Snap-on Incorporated (NYSE: SNA) lost their luster in the second half of 2021 but those times may be over. After bobbing along at the $215 level for the...

High-yield, Deep-value Snap-on Looks Buyable At These Levels

Shares of Snap-on Incorporated (NYSE: SNA) lost their luster in the second half of 2021 but those times may be over. After bobbing along at the $215 level for the last 8 months the company is presenting a deep-value/high-yield combination supported by revenue growth and widening margins in a world where growth and margin improvement is hard to come by. Snap-on may not be the flashiest stock but we view it as a winner for 2022 and beyond. How could it not be, trading at only 14X earnings and yielding 2.7% while the market is seeking value and yield?

Snap-on Incorporated Exceeds Expectations On All Levels

Snap-on Incorporated had a solid quarter if not one with robust double-digit growth. The key takeaways, however, are that revenue of $1.11 billion is up 3.2% from last year, 16% versus two years ago, and beat the Marketbeat.com consensus by 180 basis points. The strength was driven by gains in most segments with Repair and Information leading the charge. Repair and Information revenue grew 8.7% YOY followed by a 2.0% increase in Snap-on Tools. The Construction and Industrial segment its revenue fall by -0.4% but is expected to see a rebound to new highs this year while the Financial services segment revenue fell YOY as well.

Margins held up well on a YOY basis too. The Financial Services decline cut into margin slightly on a net basis but the core business saw operating margin improve by 90 basis points to 21% of revenue. This helped drive a 7.3% YOY and 33% 2-year increase in adjusted earnings to $4.10 which is more than 1000 basis points ahead of consensus and we are expecting to see the strength continue in the current quarter and this year. The company did not give any guidance in terms of revenue or earnings but it is expecting to execute on long-term goals.

Insider Cap Gains In Snap-On, Institutions Buy The Bargain

Insider activity in Snap-on hasn't been overtly bearish but certainly is enough to have helped drive shares down from their 2021 highs and kept them edging lower in the time since. The selling by insiders equals about 0.2% of the total shares, 0.3% of the market cap with shares trading near $215, and brings total ownership down to 4.2%. The upshot is that insiders still hold a solid chunk of the stock and institutional activity has been very bullish.

Institutional activity over the past year equals 3.6% of the market cap and brings their holdings up 87%. The most telling factor is that institutional buying picked up in the second half of the year when share prices were at their lowest. Activity has been muted so far in the first quarter of 2022 but is still overwhelmingly bullish and in favor of higher prices.

Snap-on Is One Handy Dividend

Snap-on is a high-quality and high-yielding dividend with a payout worth 2.7% at current prices. The yield is backed up by a solid balance sheet, a low 33% payout ratio, and an outlook for earnings growth so there are no red flags we can see. The upshot is the company has been increasing for the last 12 years with ample room to increase the payment again so we are optimistic the company will continue the trend and maintain its 15% distribution CAGR.

The Technical Outlook: Snap-on Moves Up From A Bottom

Shares of Snap-on Incorporated are moving higher in the wake of the Q4 report and appear ready to retest the top of the trading range. The move is accompanied by strong indicators so we are expecting a retest of $220/$224 with a chance of moving up to the $230 region as well. If the price action can get above $230 we see this stock retesting all-time highs near $260.