4/8/2008
By Brian Sozzi

Snap-On Inc. (SNA)

• Industry: tool manufacturers
• Sector: industrial goods

Snap-on Inc. manufactures and markets tools, diagnostics, equipment, software, and service solutions for professional users. Its products include hand tools, such as wrenches, screwdrivers, sockets, pliers, ratchets, saws and cutting tools to name a few.  Recent economic data has put into question the 1H`08 financial readings from many corporations selling discretionary or large ticket goods.  Snap On with its diverse portfolio of businesses ranging from power tools to diagnostic equipment, is in the middle of the firestorm of economic uncertainty.  However, it remains our contention that 2008 will prove to be another impressive year of growth for the company, and as a result, its share price is poised to appreciate above current levels.

The company continues to drive costs out of its business through a focused strategy of process improvements and increases in productivity.  Snap On is not solely a cost cutting enterprise as its product offerings are in strong demand by a range of industries, such as agricultural, oil/gas, and automobile repair shops.  The company has consistently executed on delivering innovative products to the marketplace and gained the trust of end users across the globe.  Serving as further support for our analysis is the fact that 43.0% of Snap On’s business is derived from international regions, meaning the weak U.S. dollar will continue to positively influence earnings in 2008.  Although we have recently made downward adjustments to our rating and FY`08 financial estimates for other tool manufacturers due to cost inflation, demand trends, and business models, we still the view shares quite attractively.

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