Yesterday, shares of Snap-on (NYSE:SNA) jumped nearly 6% after the company announced strong third-quarter earnings and a major acquisition. The company appears to be firing on all cylinders, and further gains may lie ahead.

For Fools not familiar with Snap-on, the company provides diagnostics, services, and equipment for professional tool and equipment firms. Its products include tools, diagnostic and service equipment for vehicles, and business management services.

Through franchisees that mostly visit customers directly, Snap-on sells a number of products and services, primarily to automotive-related firms such as auto dealers, but also to other industrial and construction firms. StanleyWorks (NYSE:SWK) and Danaher (NYSE:DHR) have divisions that also sell to professional auto technicians, while related auto-equipment tools can be found at retailers such as Sears (NASDAQ:SHLD) and AutoZone (NYSE:AZO).

For the third quarter, net sales increased 8.2% to $599.5 million. Management attributed the rise to strong original equipment manufacturer (OEM) sales, as well as solid trends in international markets, such as China.

Operating earnings grew 7.9%, while reported net earnings advanced 33.3%. If we strip out a $0.05-per-share tax expense in last year's quarter, earnings grew a very respectful 17.1%. Operating cash flow was also strong, growing 17.2%, and exceeded reported net income by almost 3 to 1. Subtract out capital expenditures, and free cash flow stood at $65.5 million, or $1.11 per diluted share.

In an attempt to further focus on the service side of the auto business, and to add software and systems capabilities, Snap-on also announced that it was acquiring ProQuest's (NYSE:PQE) business solutions segment, a deal it highlighted at the beginning of its earnings call. The buyout involves roughly $480 million in cash, plus the assumption of $19 million in debt. Snap-on plans to use $180 million in existing cash and borrow the remaining $300 million. The deal closes in November, and the company expects the purchase to add to its earnings by 2007. Snap-on's debt-to-capital ratio is expected to increase to 34% once the purchase closes; that's up from 17% currently, but I still wouldn't call it worrisome.

There will clearly be some concerns about integrating the ProQuest business. The acquisition is sizeable, and Snap-on hasn't made a large purchase in quite some time. Management highlighted that the acquisition was made to focus on growth, rather than simply wringing out costs from the target. That's a good thing, given my previous concerns that Snap-on's top-line sales growth has been below average.

The automotive field is not exactly a growth industry these days, but Snap-on appears to have found a stable way to make money in the space. It may be set for a boost in top-line growth as it integrates ProQuest and pursues relationships with stronger OEMs such as Toyota (NYSE:TM). If all goes according to plan, new stock highs could be in the company's future. Better yet, the already decent annual dividend yield of 2.4% could also expand going forward.

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Snap-on is an Income Investor pick. AutoZone is an Inside Value selection.

Fool contributor Ryan Fuhrmann has no financial interest in any company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. The Fool has an ironclad disclosure policy.