SNAP-ON INC. $126(New York symbol SNA; Conservative Growth and Income Portfolios, Manufacturing & Industry sector; Shares outstanding: 58.1 million; Market cap: $7.3 billion; Price-to-sales ratio: 2.2; Dividend yield: 1.4%; TSINetwork Rating: Average; www.snapon.com) makes tools for auto mechanics and sells them through a fleet of franchised vans that visit garages. It also makes specialized tools for mining companies, electrical power plant operators and other industrial customers.
The company plans to spend $75 million to $80 million in 2014 on upgrades to its distribution network, developing new products and expanding in emerging markets (overseas customers supply around a third of its revenue).
Snap-On is also fueling its growth with acquisitions. In May 2013, it bought Challenger Lifts for $38.2 million. This business makes systems that raise cars off the ground. The purchase contributed $39.3 million to Snap-On’s 2013 revenue of $3.1 billion.
In May 2014, the company paid $41.6 million for Pro-Cut International, a New Hampshire firm that makes equipment mechanics use to repair car brakes. Pro-Cut has annual revenue of $24 million.
Snap-On’s revenue in the three months ended September 27, 2014 rose 7.0%, to $806.3 million from $753.2 million a year earlier. Acquisitions contributed $5.6 million to the latest quarterly revenue. If you also exclude favourable foreign currency exchange rates, revenue rose 6.2%.
Earnings in the quarter jumped 22.6%, to $103.7 million, or $1.76 a share, from $84.6 million, or $1.43. Snap-On ended the quarter with cash of $124.7 million, or $2.15 a share. Its long-term debt of $860.5 million is a low 12% of its market cap.
The stock has gained 24% in the past year, and now trades at trades at 18.5 times the $6.82 a share that Snap-On will probably earn for all of 2014. That’s a somewhat high p/e ratio for a company that serves the cyclical automotive industry. The $1.76 dividend yields 1.4%.
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