The tools-growth slowdown in 2017 was caused by inventory adjustments, and “we aren’t always hitting on all cylinders in every quarter.” The company expects normal long-term tools sales growth of 4%, and 5% to 6% for the other divisions, with opportunities in China, Brazil, and Mexico, he adds. In an interview, Snap-on’s chief financial officer, Aldo Pagliari, offered a more sanguine view of the company’s outlook. While the actual percentages seem relatively low, it won’t take much of a profit disappointment, Mahoney contends, to damp sentiment because financing has become such an important part of EPS and because organic sales growth is slowing. Third-quarter finance receivables past due came to $46.9 million, or 2.97% of the total, up 64% from $28.6 million, or 2.38%, respectively, two years before. Earnings will be pressured, he says, if credit losses continue to rise. In particular, another skeptic, CFRA Research analyst Dan Mahoney, says that receivables past due, nonperforming loans, and net charge-offs have all worsened appreciably in every quarter-on-quarter comparison for the past two years. Says the analyst, who rates Snap-on a Sell: “We are in the early stages of a reversal of fortune for the business model.” One bear, Jon Hanlon, who runs Research 360°, an independent research outfit, argues the market is overlooking how important financial profits have become. In that case, a 15% to 20% share drop to about $150 is possible, the pessimists aver. Given investors’ expectations implied by a stock valuation higher than the company’s long-term average, if the deterioration in bad-debt gauges seen over the past two years continues, the company might not meet Street EPS expectations. The growing reliance on credit-generated profits isn’t sustainable, say bears. The commercial and industrial group is 24% of sales repair systems, 27% and finance, 8%. It accounted for 41% of total revenue in 2017’s first nine months. 8.) The problem is that an increasing number of borrowers are falling behind on their payments.Īnother concern is recent evidence of slowing organic growth in the main tools division, the biggest of Snap-on’s businesses. (Fourth-quarter and full-year numbers won’t be reported until Feb. Some 70% of Snap-on’s revenue comes from the domestic market.Ĭonsequently, results from financing have become crucial they generated 27% of operating profit in last year’s third quarter-the biggest percentage ever-versus just 4.3% in 2010. Its Snap-on in-house financing arm has boosted sales at a faster clip than otherwise might have been the case, given the decelerating growth in the number of U.S. With about 4,900 franchisees and a $10 billion stock-market value, the Kenosha, Wis., company is its industry’s biggest player. But potential headwinds could cause Snap-on to miss consensus earnings-per-share expectations this year, denting its hot stock performance. SNAP ON CREDIT SOFTWAREThereafter, the defendant has filed a motion for summary judgment.The advance in the stock (ticker: SNA) of this well-known maker of high-quality automotive tools, diagnostic equipment and software has come courtesy of earnings that nearly doubled to $9.20 a share in 2016 from $4.71 in 2011. Plaintiff trustee, as a result of debtor's prepetition transfer of the leased equipment to defendant, filed an adversarial complaint to recover the transfer as a preference pursuant to 11 U.S.C.S. Because of arrearages, debtor filed a bankruptcy petition for relief and named defendant as a party holding an unsecured nonpriority claim. Subsequently, debtor defaulted and returned the equipment to defendant. Facts:ĭebtor entered into a lease agreement for equipment with defendant lessor and filed a financing statement naming defendant the assignee. Unless there are enough assets in the debtor's bankruptcy estate to enable all of the unsecured creditors to receive a 100 percent distribution, any prepetition payments made to an unsecured creditor will be preferential under § 547(b). The effect of this is that prepetition transfers made to unperfected secured creditors will be necessarily preferential under 11 U.S.C.S. SNAP ON CREDIT CODEThe Bankruptcy Code completely eliminates the unperfected security interest, leaving the secured creditor with only an unsecured claim against the debtor's bankruptcy estate.
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