Snap-on Incorporated (SNA - Free Report) recently acquired Rockaway, NJ-based Power Hawk Technologies, Inc., alias, Power Hawk, for a cash outlay of about $8 million. The buyout is expected to reinforce the company’s capabilities while providing solutions to make tasks simpler for serious professionals.
Power Hawk is the manufacturer and distributor of rescue tools and equipment that serves military, governmental, fire and emergency purposes. As a result, Snap-on will be able to increase its competency to serve critical industries in military and emergency operations.
Notably, Power Hawk will form part of Snap-on’s Commercial & Industrial Group segment. We note that this segment has been displaying significant strength since past few quarters now. In fourth-quarter 2018, sales at the division increased 0.6% with organic sales growth of 3.5%. Organic sales benefited from double-digit sales growth in both the Asia Pacific operations and specialty tools business along with higher sales to customers in critical industries and low single-digit growth in European-based hand tools business.
Sales in the Asia Pacific region reflected strength in India and across Southeast Asia more than offsetting the lower sales in China. Further, the company is witnessing significant progress in critical industries driven by strong activity in aviation and general industry. We expect the latest acquisition to contribute to the Commercial & Industrial Group’s strength, thus driving the company’s overall sales and profitability.
However, shares of this global provider of professional tools and related solutions have gained 4.2% in the past three months, underperforming the industry’s 11.4% rally. This underperformance might be attributed to Snap-on’s soft sales surprise as the top line missed estimates for the third straight quarter in the most recent quarter. Also, the company is witnessing sluggishness in its Tools Group segment, which is being hurt by lower sales at its International franchise business.
Nevertheless, Snap-on’s efforts to revive performance at the Tools Group division are encouraging. The company expects to leverage its capabilities in the automotive repair area besides strengthening the overall professional customer base. Apart from automotive repair, it expects to add customers from adjacent markets, newer geographies and other areas like critical industries. Moreover, this Zacks Rank #3 (Hold) company is gaining from a robust business model that helps in enhancing the value-creation processes. This, in turn, improves safety, quality of service, customer satisfaction and innovation.
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