Snap-On Stock's Post-Q3 Response Is The Exception To The Rule

The company announced before the market open on Thursday that its third-quarter earnings per share rose to $2.22, topping the Street forecast of $2.15. However, revenues of $834.1 million trailed the average analyst estimate of $847.8 million.

This is not a one-off event for keen followers of the company. A peek into the company's second and first-quarter results yields the same conclusion. The company is into the habit of earnings outperformance, while at the same turning in underwhelming revenues. Cost discipline might be the probable reason.

The surprise this time around was the reaction of the stock to the earnings announcement. Shares rose 6.67 percent, a commendable showing compared to the lackluster showing by the broader markets Thursday.

Related Link: Snap-On Q3 EPS $2.22 vs $2.15 est, Revenue $834.1M vs $847.8M est

Following its July second-quarter earnings release, Snap-on fell 3.45 percent and has thus far failed to reclaim the 160 level it traded ahead of the second-quarter release. The stock showing after the first-quarter earnings release on April 21 is no different, with the stock ticking down by 0.70 percent.

Is there a rationale behind the divergence from the trend in the stock reaction seen following the third quarter results? Although it is difficult to pinpoint a reason, the guess is that the Street is warming to the idea that the company delivers on the bottom-line target even if sales is constrained.

At last check in Friday's morning session, Snap-on was down 1.57 percent at $156.57.

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