Market Overview

Snap-on Tops Q2 Earnings on Expansion Initiatives, Shares Up

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Shares of Snap-on Inc.(NYSE: SNA) gained a robust 4.06% after the company reported strong second-quarter 2014 results with healthy growth in net sales and earnings. Net income for the reported quarter increased to $106.1 million or $1.80 per share from $88.4 million or $1.50 per share in the year-earlier quarter. Reported earnings exceeded the Zacks Consensus Estimate of $1.55 per share by 7.1%.

Management's focus on enhancing van network, increasing repair shop owners and managers, extending service to critical industries, strategic acquisitions and expansion in emerging markets benefited the company.

Revenues

Net sales of the company for the second quarter increased 8.2% year over year to $826.5 million. Excluding inorganic revenues of $10.5 million of acquisition related expenses and $1.4 million of adverse foreign currency translation effects, organic sales rose 6.6% year over year. Total quarterly revenue was well above the Zacks Consensus Estimate of $809 million.

Segment Results

The Commercial & Industrial Group segment sales increased a robust 7.9% year over year to $287.2 million on higher demand from customers in critical industries and European hand tools business. Organic sales also increased 8.4% year over year.

The Snap-on Tools Group segment sales increased 6.6% year over year to $369.1 million, driven by sales gains in both the U.S. and international franchise operations. Organic sales were up 6.6%.

The Repair Systems & Information segment sales increased 13.1% year over year to $278.5 million, primarily on higher sales to OEM dealership service and repair shops and increased sales of diagnostic and repair information products to independent repair shop owners and managers. Organic sales were up 7.7% year over year.

The Financial Services business reported revenues of $51.7 million compared with $44.5 million in the year-ago quarter. Operating earnings for the segment totaled $34.8 million as against $30.6 million in the prior-year period.

Snap-on registered consolidated operating earnings of $172.9 million or 19.7% of total revenue for second-quarter 2014 compared with $148.4 million or 18.4% of total revenue in the year-earlier quarter. 

Balance Sheet & Cash Flow

Cash and cash equivalents were $115.8 million as at Jun 28, 2014 compared with $217.6 million at the end of 2013. The company had a long-term debt of $861.5 million versus $858.9 million at the end of 2013. Net cash provided by operating activities increased to $124.4 million in the reported quarter from $110.1 million in the second quarter of 2013.

Outlook

Snap-on reiterated its guidance for fiscal 2014. The company expects to incur capital expenditures in the range of $70 million to $80 million in 2014. The company also plans to continue its focus on emerging markets, expand its presence in new industries, enhance its mobile tool distribution network and expand in the vehicle repair garage market going forward.

Snap-on currently has a Zacks Rank #2 (Buy). Some other stocks in the sector that can be considered in the moment include Blount International Inc. (NYSE: BLT), EnPro Industries, Inc. (NYSE: NPO) and Broadwind Energy, Inc. (NASDAQ: BWEN). While Blount International and EnPro Industries sport a Zacks Rank #1 (Strong Buy), Broadwind Energy have same Zacks Rank as Snap-on.

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