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Snap On Is Set To Snap Back

BusinessWeek Investor -- Inside Wall Street

Snap-on Is Set to Snap Back

Like many other Old Economy stocks, Snap-on (SNA) is sagging, down from 33 in September to 21 in early March. But lately, Snap-on, the No. 1 maker of hand tools and diagnostic gear for auto mechanics, has inched up to 24. Some investors think Snap-on may be on the mend.

One reason: Snap-on has developed an e-commerce business that some believe will provide additional growth this year. "Snap-on's e-commerce strategy is about the best in the auto world," says Michael Ward of Salomon Smith Barney.

Through the Internet, the company can deal directly with retail customers, instead of through franchised dealers and distributors. "Over the next few years, revenue from retail customers could reach $1 billion," says Ward. Snap-on recently formed an alliance with Genuine Parts and the NAPA AutoCare Centers as part of its move online. Ward figures Snap-on will earn $3 a share this year and $3.40 in 2001.

Snap-on, one of the companies that make up the Standard & Poor's 500-stock index, is trading at 8 times this year's estimated earnings--well below its norm. "Historically, Snap-on traded at 14 times forward earnings," says Ward.By Gene G. MarcialReturn to top

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