Zacks_Analysts' Blog : Snap-On Inc Beats Estimates - Analyst Blog

Snap-On Incorporated (SNA) reported revenues of $693.7 million for the first quarter of 2011, up 11.6%, from 2010 levels. Excluding $9.1 million of favorable foreign currency translation, organic revenues increased 10.0%.

Net earnings of $56.2 million, or 96 cents per diluted share, increased from $36.8 million, or 63 cents per diluted share, a year ago. This was above 89 cents as per the Zacks Consensus Estimate.

Gross profit was $330.6 million and margin improved to 47.7% of revenues, compared to 46.3% a year ago.

Operating expenses of $243 million in the quarter increased $27 million from 2010 levels, largely due to higher volume related and other expenses including: $6.8 million of increased performance-based and stock-based compensation including mark-to-market, $2.3 million of anticipated higher pension expense and $2.2 million of unfavorable foreign currency effects.

Segment Details

Commercial and Industrial Group revenues of $272 million for the first quarter improved 10.3% from 2010 levels. Excluding currency translation, organic sales increased 8.4%. Continued higher sales to customers in emerging markets, increased sales in the segment's European-based Hand Tool business and continued sales progress in the critical industries of aerospace and natural resources more than offset lower year-over-year sales to the military.

Revenues in Snap-on Tools Group increased 13.5% year-over-year, largely due to continued higher sales in the United States. On an organic basis, sales were up 11.7%.

Repair Systems & Information Group sales of $227 million increased 12.3% year-over-year. Excluding currency translation, organic sales increased 11.7%, reflecting higher sales of undercar equipment and increased essential tool and facilitation program activity with automotive OEM dealerships.

Financial Services operating earnings of $12.5 million in the first quarter compares favorably with both fourth quarter 2010 earnings of $9.4 million and the first quarter 2010 loss of $1.7 million.

Balance Sheet and Cash Flow

At quarter-end, balance sheet includes $785 million of gross financing receivables including $640 million from Snap-on Credit operations in the U.S. Consolidated operating cash flow of $27.9 million for the quarter compares to $10.4 million last year.

Quarter-end cash position of $517 million decreased $55 million from year-end levels, primarily due to the funding of new loans originated by Snap-on Credit, increased working investment in capital expenditures partially offset by higher net earnings. Free cash flow in the quarter was $3 million , a negative $35 million from financial services reflecting the continued funding of new loan originations at Snap-on Credit.

Snap-on Incorporated is a leading global innovator, manufacturer and marketer of tools, equipment, diagnostics, repair information and systems solutions for professional users performing critical tasks. The Home Depot, Inc (HD) is a major competitor.

We currently have a Neutral recommendation on Snap-On-Inc.