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Snap-on’s Pullback Is A Chance To Buy


Snap-on reported fourth quarter earnings this week and beat both top and bottom line. The stock, however, did not fare well as slower than expected growth in the tool segment set the stock down 8%. The segment was expected to grow at 4-6% however results came in at 1.5%. The revenue was bolstered by an uptick in their diagnostic segment.

The selloff represents a good entry point in an otherwise extremely well performing company. Management stated during the conference call that they fully expect to capture the 4-6% growth target going forward. I had previously stated in another post that I look for strong, stable companies with a proven track record and moderate growth in an expensive market. Snap-on meets those requirements quite well.


They are the standard for tools in the industry, while other manufactures have gone for cheaper lower quality tools, Snap-on remains the toughest and most durable. The brand value that Snap-on carries allows them to charge a premium price. In the tool industry it is difficult for a new entrant to establish a brand and associate the business with quality. While mass manufacturing in China has driven prices down on tools, Snap-on has been able to maintain their position as superior and keep pricing power. Their brand and quality gives them a stable economic moat, which serves as a barrier for new entrants trying to take their premium tool market share. For these reasons I believe that they will continue to have strong results going forward.  

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