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Snap-on Narrowly Beats Consensus Estimates

Snap-on reported third-quarter 2013 earnings per share of $1.43, nearly in line with the $1.42 EPS Street consensus estimate. Once again, the company was able to expand consolidated operating margin, which was 14.8% versus 13.5% last year, despite challenging operating conditions from anemic European economic conditions and reduced defense spending in the U.S. Our $105 fair value estimate remains unchanged. This 3-star rated stock is difficult to buy on the cheap as a result of its consistent solid performance. However, investors are rewarded with a 1.5% annualized dividend yield for holding Snap-on shares.

Snap-on is narrow-moat rated for its strong brand and intellectual property. The company’s competitive advantages enable a sterling reputation among its end-users, who are willing to pay a premium for Snap-on’s products. Demonstrating its intellectual property and in support of its brand, Snap-on was the only tool provider to have three spots in this year’s MOTOR Magazine Top 20 Tool Awards. Our investment thesis remains intact as the company focuses growth efforts on enhancing the mobile tool distribution network, expanding to repair shop owners and managers, extending to critical industries (like aerospace, oil & gas, mining, defense), and penetrating emerging markets.


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