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Snap On Tools Inc. (SNA - Analyst Report) is set to report its fourth quarter 2012 results on Feb 7. Last quarter, it posted a 2.4% earnings surprise. Let’s see how things are shaping up for this announcement.

Growth Factors This Past Quarter

Snap On is benefiting from its focus on expanding in the emerging markets, extending into critical industries, enhancing franchise network and expanding its presence in repair garage. During the third quarter, the company faced severe unfavorable currency headwinds, as a result of which two of the four operating segments reported flat revenues. However, despite flat revenues, gross margin during the quarter surged 61 basis points.   

Earnings Whispers?

Our proven model does not conclusively show that Snap On is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP:  That is because the Most Accurate estimate stands at $1.36 while the Zacks Consensus Estimate is higher at $1.37. That is a difference of -0.73%.

Zacks #3 Rank (Hold):  Snap On Inc’s Zacks #3 Rank (Hold) lowers the predictive power of ESP because the Zacks #3 Rank when combined with a negative ESP makes surprise prediction difficult. We caution against stocks with Zacks #4 and #5 Ranks (Sell-rated stocks) going into the earnings announcement, especially when the company is witnessing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:  

Interdigital Inc. (IDCC - Snapshot Report), with earnings ESP of +350% and a Zacks #2 Rank (Strong Buy)

Juniper Networks Inc. (JNPR - Analyst Report), with earnings ESP of +7.14% and Zacks #2 Rank (Buy)

Clean Energy Fuels Corp. (CLNE - Snapshot Report), with earnings ESP of +87.50% and Zacks #2 Rank (Buy)

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