Snap-On Tops EPS Ests on Lower Rev

Snap-On Inc. (SNA) reported earnings from continuing operations of 78 cents per share for the second quarter of 2010, exceeding the Zacks Consensus Estimate of 73 cents.

Revenues of $647.6 million increased by $57.6 million, or 9.8%, from the corresponding prior-year period. This was below the Zacks Consensus Estimate of $666 million.

Segment Results

Commercial & Industrial Group segment revenues of $258.7 million in the second quarter increased $46.6 million, or 22.0%, from the year-ago period. This reflected continued growth in all divisions, especially those serving key industries and emerging economies. Excluding foreign currency translation effects, organic revenues increased 22.5%.

Snap-on Tools Group segment sales of $264.5 million in the quarter increased $21.9 million, or 9%, from the corresponding prior-year period. Excluding foreign currency translation, organic sales increased 7.8%, which reflected robust 9.3% growth in the U.S.

Repair Systems & Information Group segment sales of $205.9 million in the quarter increased $7.9 million, or 4.0%, from the prior-year period. This was due to higher global sales of equipment, tools and facilitation programs.

Financial Services revenue of $13.9 million in the quarter declined $11.7 million from the prior-year period. On July 16, 2009, Snap-on terminated its financial services operating agreement with CIT Group Inc. (CIT) relating to the  Snap-on Credit LLC (“SOC”) joint venture. The changes arising from accounting treatment were primary determinants of the year-over-year fall in financial services revenues and operating income.

Outlook

Snap-on recorded $6.3 million in restructuring costs during the first half of 2010 and continues to expect full-year 2010 restructuring costs of approximately $15 million. The company anticipates capital expenditures in 2010 to be $50 million, of which $12.3 million has already been incurred in the first half.

Over the past few years, management has focused on delivering a more predictable and consistent financial performance. To this end, management implemented the ‘Driven to Deliver’ strategy in 2001, which resulted in an increased focus on customer relationships and business processes. In addition, the company has invested in new products and increased brand awareness.

In early 2005, management introduced the Rapid Continuous Improvement process, which is designed to improve organizational effectiveness and lower costs, including working capital requirements. As a result, asset utilization has improved by rationalizing production through plant closures, and working capital has been used more effectively.

Headquartered in Kenosha, Wisconsin, Snap-on is a global provider of professional tools, equipment, and related solutions for technicians, vehicle service centers, original equipment manufacturers (OEMs), and other industrial users.

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

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