Snap-on, Inc. (SNA) has reported upside earnings surprises for ten consecutive quarters, which has caught the attention of earnings momentum investors. The management has successfully delivered more predictable and consistent financial performance through the implementation of the Driven to Deliver and Rapid Continuous Improvement programs. With the stock’s pull-back to the low-$50s, its valuation compels us to recommend a Buy rating.

Through a structured approach of supply chain and franchise improvement initiatives, order-fill rates are improving and profitability is increasing across all operating segments except the Tools Group. The acquisition of ProQuest Business Solutions has added value for global original equipment manufacturers (OEM) and enhanced the productivity and profitability of their dealerships.

The company acquired majority ownership of Zhejiang Wanda Tools Company of China in March. The acquisition provides extensive capacity for Asia-based high-quality hot-forged hand tools. In light of the management’s supply-chain and franchise improvement initiatives, there has been a considerable improvement in the operating margin over the past five quarters. Strong cash flows have allowed management to return value to shareholders.

Over the last ten years, the Snap-on’s stock has traded in a P/E range of 25 to 12. With the stock having pulled back and with the company robust, the stock appears attractive. The target price is $72.25, which is based on 19 P/E multiple on 12 month trailing earnings.

Read the full analyst report on SNA

“SNA” Free Stock Analysis: Buy? Sell? Hold?
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