Snap-On shares rise as analyst upgrades toolmaker

HARTFORD, Conn. (AP) — Shares of Snap-On Inc. rose Friday as an analyst upgraded the toolmaker, saying its finance unit's business model has shielded it from the crisis that has pulled down other financial businesses.

Analyst James C. Lucas of Janney Montgomery Scott LLC upgraded Snap-On to "Buy" from "Neutral."

He based his upgrade on Snap-On's attractive free cash flow yield, a "secure dividend" and no significant issues related to its credit business.

The Kenosha, Wis., company lends money to auto technicians to help increase sales of tools and storage units, with Snap-On franchisees collecting on receivables each week, Lucas said in a note to investors.

He called it a "rather unique business model" with loan losses averaging less than 3 percent.

Snap-On faces the same problems as do other industrial companies in the recession, but it has been "right-sizing the organization during the boom years, which is allowing the company to focus less on defense and more on offense."

The company benefits from the recession as motorists keep their cars longer rather than buy new autos, requiring more repairs by shops using Snap-On tools, Lucas said. In addition, it is expanding beyond car repair shops to selling tools to aerospace, mining, alternative energy and military markets, he said.

Wednesday, Snap-On said its fourth-quarter earnings edged up 2 percent, as cost cuts and an acquisition-related adjustment helped lift results despite lower sales and a worsening economy.

Shares increased 79 cents, or 3.8 percent, to $21.45 in Friday morning trading.