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With more complicated cars, Snap-On reaps benefits

One high quality company on Jim Cramer's radar is Snap-On. The company announced earnings Thursday and beat Wall Street's expectations, prompting the stock to jump more than 2 percent in a single session.

Snap-On is the maker of premium tools and diagnostic equipment for auto repair shops, as well as aerospace, agriculture, construction, mining and power generation clients. The stock has been raising steadily, albeit quietly, and has more than doubled in the last five years.

The company delivered a 4-cent earnings beat from a $1.94 basis, and even though sales were in a little below what analysts were looking for, it had healthy organic growth across all of its major divisions.

To find out more about what was behind its stellar growth, Cramer spoke with Snap-On Chairman and CEO Nick Pinchuk.





He explained that the secret to its earning success was tied to more complicated cars hitting the market. Not more car dealers or more technicians — it was the drive of different changes in vehicles.

"Every time a car changes, we have new things to bring out. And that's what organic growth is. If you're talking about 7.3 percent in growth, you're talking about bits and bytes and tool and aligners and lifts that we sell more year-over-year, and that's what happened this time," Pinchuk said.

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According to Pinchuk, four out of 10 older cars in independent garages these days require high-end diagnostic tools for repairs. However, when he surveyed newer cars, he found that seven out of 10 cars needed diagnostics for repairs.

"So, pretty soon everybody's going to need this, and we have a full range of products," Pinchuk added.

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