NEW YORK -- Janney Capital Markets cited the meteoric rise in Snap-On shares this as it stepped back from its "buy" rating Friday, a day after the stock was driven to an all-time high by a stellar third quarter.
The downgrade to "neutral" is not for lack of confidence in the Kenosha, Wis., toolmaker. But shares have jumped 52 percent this year alone and that's made it too pricey, even for a company with a great track record.
Wherley did question whether Snap-on has found the most profitable use for all of next year's expected free cash flow.
"Snap-on's focus on critical industries and emerging markets is key to long-term growth, but we would like to see more evidence of the growth opportunities that can be attained with the increase in free cash flow," Wherley wrote.
The company said Thursday that it have capital expenditures of as much as $80 million as it broadens its footprint in emerging markets and invests heavily in its mobile tool distribution network.
Snap-on posted a 9 percent jump in profits Thursday for the third quarter and a 3 percent rise in revenue, easily beating Wall Street expectations on both counts. The stock breezed past $78 each, the first time that's ever happened.
Despite two years of strong revenue growth ($752.1 million for the third quarter), Wherley expects that to moderate in 2013 to somewhere around 6.3 percent.