Whenever possible, I like to begin a Take with a snappy lead. That won't be necessary today, however (and my imagination can use the break), because the firm whose Q4 and full-year 2005 earnings we'll be previewing is none other than Snap-On (NYSE:SNA). Not only does the firm come with snappy lead included, it also bears the imprimatur of dividend snapper-upper Mathew Emmert, lead analyst for Motley Fool Income Investor.

Wall Street Wisdom:

  • General consensus. Wall Street analysts aren't a big grease-monkey crowd. Only five of them deign to review Snap-On, and of those, four don't even "hold" an opinion worth expressing. The one who does rates the company a sell.
  • Revenues. Their lack of enthusiasm is perhaps understandable, however, when you consider that the company isn't likely to show any growth (this quarter, at least.) According to the analysts, Q4 revenues are expected to come in just 0.1% higher than they did last year. $592.6 million is the estimate.
  • Earnings. Profits are expected to slide from $0.42 per share in Q4 2004 to $0.38 tomorrow.

Margin watch:
Snap-On's margins aren't exhibiting any particular trend -- not that this Fool can discern, at least. Gross margins have ebbed, but appear to be flowing once more. Operating margins likewise. But the net margin continues to look pretty anemic.

Margins %

7/04

10/04

1/05

4/05

7/05

10/05

Gross

45.0

44.4

45.8

45.6

45.9

46.6

Op.

6.7

5.3

6.9

7.2

7.5

8.6

Net

3.0

3.2

3.4

3.6

3.8

3.7

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ending in the named months.

Foolish forensics:
Snap-On's sales have been stagnant for the entire past year. Nevertheless, by keeping its cost of goods sold down, the firm has managed to improve its gross margins in recent quarters. Meanwhile, operating margins are rising strongly, and it's likely that net profits would be, too, but for a series of "one-time" restructuring charges that have been weighing them down.

Foolish lookout:
Last quarter, Snap-On highlighted its strong free cash flow as belying these net results, boasting $117 million in cash generated from operations through the first three quarters of 2005. That's a great start, but Snap-On's cash from operations has been on a general downward trend for quite a while. Tomorrow, let's look for signs that this trend has truly reversed.

Fool contributor Rich Smith does not own shares of any company named above.