Snap-on Incorporated (SNA - Free Report) acquired Cognitran Limited, a market leader in after sales solutions, for around $31 million of cash. The buyout is expected to reinforce the company’s capabilities while providing solutions through integrated upstream services to original equipment manufacturer (“OEM”) clients.
Cognitran focuses in flexible and highly scalable “Software as a Service” (SaaS) products for OEM consumers and their dealers. These products also focus on the creation and delivery of services, diagnostics, parts and repair information to the OEM dealers and connected vehicle platforms. Notably, Cognitran will be part of Snap-on’s Repair Systems & Information Group segment.
Prior to this, Snap-on had acquired Power Hawk Technologies, for about $8 million of cash consideration. This buyout is helping the company to increase its competency to serve critical industries in military and emergency operations.
Apart from these, Snap-on is benefiting from a robust business model and focus on value-creation processes. Its growth strategy focuses on three critical areas — enhancing the franchise network, improving relationship with repair shop owners and managers, and expanding critical industries in emerging markets.
Further, this Zacks Rank #3 (Hold) company is dedicated toward various strategic principles and processes aimed at creating value in areas like Rapid Continuous Improvement (RCI). Snap-on’s RCI program, designed to enhance organizational effectiveness and minimize costs, has been driving margins and profits. Moreover, management intends to boost customer services along with enhancing manufacturing and supply-chain capabilities through the RCI initiatives and further investments. The company anticipates making progress on these growth strategies in 2019.
However, shares of this global provider of professional tools and related solutions have declined 8.2% in the past three months, wider than the industry’s decline of 6.1%. This underperformance might be attributed to Snap-on’s soft sales surprise trend as the top line missed estimates for the fourth straight quarter in the second quarter. Also, the company is witnessing sluggishness in its Commercial & Industrial Group segment due to adverse impacts of foreign currency.
Nevertheless, management remains optimistic about the overall macro-economic condition of the vehicle repair and critical industries markets it serve. It also believes that these markets will continue to provide opportunities to simplify the work of serious professionals.
In 2019, the company plans to remain on track with its objectives for coherent growth and leveraging capabilities as demonstrated in the automotive repair arena. It also expects to develop and expand its professional customer base in the automotive repair business as well as in adjacent industries, additional geographies and other areas like extending in critical industries.
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