Snap-on Inc. (SNA) reported strong fourth-quarter 2013 results with healthy growth in net sales and earnings. Net income for the reported quarter increased to $94.5 million or $1.60 per share from $84.6 million or $1.43 per share in the year-earlier quarter. The reported earnings exceeded the Zacks Consensus Estimate of $1.55 per share.
For full-year 2013, the company’s net income increased to $350.3 million or $5.93 per share, from $306.1 million or $5.20 per share in 2012. The full-year earnings were also ahead of Zacks Consensus Estimate of $5.89 per share.
Despite some external headwinds, management’s focus on enhancing van network, expanding repair shop owners and managers, extending service to critical industries, strategic acquisitions and expansion in emerging markets continued to favorably benefit the company.
Revenues
Net sales of the company were increased 5.9% year over year to $797.5 million in the reported quarter. Excluding inorganic revenue of $15.2 million from the May 2013 acquisition of Challenger Lifts, Inc. and $5.3 million of adverse foreign currency translation effects, organic sales increased 4.6% year over year. Total quarterly revenue fell short of the Zacks Consensus Estimate of $781 million.
For full-year 2013, net sales of the company were up 4.0% year over year to $3.1 billion. Excluding inorganic revenue of $39.3 million from the Challenger business and $21.6 million of adverse foreign currency translation effects, organic sales increased 3.5% year over year.
Segment Results
Commercial & Industrial Group segment sales increased 2.8% year over year to $283.2 million driven by higher sales in power tools and European hand tools business. Organic sales also increased 4.0% year over year. Weakness seen in the segment’s military business continued from the third quarter.
Snap-on Tools Group segment sales increased 9.2% year over year to $351.1 million, driven by sales gains in both U.S. and international franchise operations. Organic sales were up 10.2%.
Repair Systems & Information segment sales increased 9.5% year over year to $264.6 million, primarily on gains in sales of diagnostics and repair information products to repair shop owners and managers. Organic sales were up 2.9% year over year. Lower sales in original equipment manufacturer dealerships proved to be a headwind for the business.
Financial Services reported revenues of $47.4 million compared with $42.9 million in the year-ago quarter. Operating earnings for the segment stood at $33.0 million compared with $29.3 million million in the prior-year period.
Snap-on registered consolidated operating earnings of $156.6 million or 18.5% of total revenue for the fourth quarter 2013 compared with $140.7 million or 17.7% of total revenue in the prior-year quarter.
For full-year 2013, the company registered consolidated operating earnings of $586.2 million or 19.2% of total revenue compared with $516.4 million or 17.6% of total revenue in 2012.
Balance Sheet & Cash Flow
Cash and cash equivalents at year-end 2013 were $217.6 million compared with $214.5 million at the end of 2012. The company had a long-term debt of $858.9 million, down from the last year’s figure of $970.4 million. Net cash provided by operating activities increased to $392.6 million in 2013 from $329.3 million in 2012.
Outlook
Snap-on expects to incur capital expenditures in the range of $70 million to $80 million in 2014. The company also noted that it will continue to focus on emerging markets, expand its presence in new industries, enhance its mobile tool distribution network and expand in the vehicle repair garage market going forward.
Snap-on currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the industry include Emerge Energy Services LP (EMES), ScanSource, Inc. (SCSC) and Hudson Technologies Inc. (HDSN). All these carry a Zacks Rank #2 (Buy).
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