Yesterday, shares of Snap-on
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
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
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
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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.