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The recent correction in the stock market has knocked down Snap-on Inc. (SNA - Analyst Report) shares to an attractive valuation.

The stock has a Zacks #1 Rank. It trades at 15.2x 2010 consensus EPS estimates and 12.1x 2011 consensus EPS estimates.

Growth and Income

Analysts are forecasting robust earnings growth for the next two years. For 2010, analysts estimate EPS growth of 22.7%. For 2011, analysts estimate EPS growth of 25.5%. Additionally, the stock offers investors current income with its dividend yield of 2.5%.

Business

Snap-On manufactures and markets tools, diagnostics, equipment, software, and service solutions for professional users in the U.S. and internationally. Its products include hand tools, cutting tools, torque measuring instruments, and power tools.

Solid First-Quarter Results

On April 20, Snap-on reported revenue of $621.6 million, up 8.6% year-over-year. The company earned $0.63 per share, topping the Zacks Consensus Estimate by 13 cents, or 26.0%.

The company's gross margin improved by 110 basis points to 46.3%. Excluding its financial services business, Snap-on's operating margin increased 210 basis points.

While challenges remain, CEO Nick Pinchuk said, "We are encouraged by Snap-on's first-quarter results and by some of the performance trends achieved during the quarter."

Estimates Moving Higher

Snap-On Inc. has now beaten the Zacks Consensus for the last two quarters by an average 20.3%.

After Snap-on reported better-than-expected first-quarter results, analysts boosted their estimates for 2010 and 2011. The Zacks Consensus Estimate for 2010 increased 30 cents, or 11.8%, to $2.85, and the 2011 Zacks Consensus Estimate climbed 19 cents, or 5.6%, to $3.57. Estimates have been holding steady for the last two months.

Balance Sheet

Snap-on ended the first quarter with $472.3 million in cash and total debt of $916.2 million. The company's total debt-to-equity ratio is 25.9%.

The Chart

Since bottoming at $26.50 in July 2009, SNA shares are up over 82%. Last week, the stocks gapped higher after the company reported better-than-expected first-quarter results. SNA shares hit a new 52-week around $50 a few days later. Its stock has sold-off with the rest of the market and now trades about 13% below its 52-week high.

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