Critical Analysis: CNH Industrial (NYSE:CNH) & Snap-On (NYSE:SNA)

Snap-On (NYSE:SNA) and CNH Industrial (NYSE:CNH) are both large-cap industrials companies, but which is the superior business? We will compare the two businesses based on the strength of their valuation, earnings, dividends, risk, profitability, analyst recommendations and institutional ownership.

Profitability

This table compares Snap-On and CNH Industrial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Snap-On	20.82%	16.77%	11.82%
CNH Industrial	1.71%	6.78%	1.24%

Analyst Ratings

This is a breakdown of current ratings and price targets for Snap-On and CNH Industrial, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Snap-On	0	1	4	0	2.80
CNH Industrial	1	6	7	0	2.43

Snap-On presently has a consensus target price of $434.00, indicating a potential upside of 18.16%. CNH Industrial has a consensus target price of $13.39, indicating a potential upside of 15.81%. Given Snap-On’s stronger consensus rating and higher probable upside, analysts plainly believe Snap-On is more favorable than CNH Industrial.

Risk and Volatility

Snap-On has a beta of 0.75, indicating that its stock price is 25% less volatile than the S&P 500. Comparatively, CNH Industrial has a beta of 1.23, indicating that its stock price is 23% more volatile than the S&P 500.

Insider and Institutional Ownership

84.9% of Snap-On shares are held by institutional investors. Comparatively, 59.9% of CNH Industrial shares are held by institutional investors. 3.8% of Snap-On shares are held by company insiders. Comparatively, 0.2% of CNH Industrial shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Dividends

Snap-On pays an annual dividend of $9.76 per share and has a dividend yield of 2.7%. CNH Industrial pays an annual dividend of $0.10 per share and has a dividend yield of 0.9%. Snap-On pays out 50.8% of its earnings in the form of a dividend. CNH Industrial pays out 40.0% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Snap-On has increased its dividend for 15 consecutive years. Snap-On is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings and Valuation

This table compares Snap-On and CNH Industrial”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Snap-On	$4.74 billion	3.99	$1.02 billion	$19.23	19.10
CNH Industrial	$18.09 billion	0.79	$510.00 million	$0.25	46.26

Snap-On has higher earnings, but lower revenue than CNH Industrial. Snap-On is trading at a lower price-to-earnings ratio than CNH Industrial, indicating that it is currently the more affordable of the two stocks.

Summary

Snap-On beats CNH Industrial on 12 of the 17 factors compared between the two stocks.

About Snap-On

Snap-on Incorporated manufactures and markets tools, equipment, diagnostics, and repair information and systems solutions for professional users worldwide. It operates through Commercial & Industrial Group, Snap-on Tools Group, Repair Systems & Information Group, and Financial Services segments. The company provides hand tools, including wrenches, sockets, ratchet wrenches, pliers, screwdrivers, punches and chisels, saws and cutting tools, pruning tools, torque measuring instruments, and other related products; power tools, such as cordless, pneumatic, and hydraulic and corded tools; and tool storage products comprising tool chests, roll cabinets, and other products. It provides handheld and computer-based diagnostic products, service and repair information products, diagnostic software solutions, electronic parts catalogs, business management systems and services, point-of-sale systems, integrated systems for vehicle service shops, original equipment manufacturer purchasing facilitation services, and warranty management systems and analytics; and engineered solutions. In addition, the company offers solutions for the service of vehicles and industrial equipment that include wheel alignment equipment, wheel balancers, tire changers, vehicle lifts, test lane equipment, collision repair equipment, vehicle air conditioning service equipment, brake service equipment, fluid exchange equipment, transmission troubleshooting equipment, safety testing equipment, battery chargers, and hoists, as well as after-sales support services and training programs. Further, it provides financing programs to facilitate the sales of its products and support its franchise business. It serves the aviation and aerospace, agriculture, infrastructure construction, government and military, mining, natural resources, power generation, and technical education industries. Snap-on Incorporated was incorporated in 1920 and is headquartered in Kenosha, Wisconsin.

About CNH Industrial

CNH Industrial NV is an equipment and services company, which develops, manufactures and sells specialized machines and services for the farming and construction industries, and supplies replacement parts and accessories. It operates through the following operating segments: Agriculture, Construction, and Financial Services. The Agriculture segment designs, manufactures, and distributes a full line of farm machinery and implements, including two-wheel and four-wheel drive tractors, crawler tractors, combines, grape and sugar cane harvesters, hay and forage equipment, planting and seeding equipment, soil preparation and cultivation implements and material handling equipment. The Construction segment comprises of a full line of construction equipment including excavators, crawler dozers, graders, wheel loaders, backhoe loaders, skid steer loaders, and compact track loaders. The Financial Services segment offers retail note and lease financing to end-use customers for the purchase of new and used agricultural and construction equipment and components. The company was founded in 1866 and is headquartered in London, the United Kingdom.