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What Drove Illinois Tool Works to a New 52-Week High?

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Shares of Illinois Tool Works Inc. (ITW - Free Report) reached a new 52-week high of $106.75 on Jun 1, before closing the trading session slightly lower at $106.70. The last 52-week high of $106.19 was achieved on Apr 19.

The new apex reflects a year-to-date return of 15.8%. The trading volume for the session was 2.7 million shares. Earnings estimate revisions for 2016 and 2017, along with an expected earnings growth rate of 8.9% for the next five years, indicate the scope for stock price appreciation.

Growth Drivers

Illinois Tool Works impressed investors with better-than-expected results for the trailing four quarters, bringing the average positive surprise to 1.95%. The company recorded a positive earnings surprise of 2.38%, with earnings of $1.29 per share exceeding the Zacks Consensus Estimate of $1.26, for first-quarter 2016. Revenues totaled $3,274 million in the quarter, above the Zacks Consensus Estimate of $3,247 million. The company’s share price has gained roughly 2.3% since its first-quarter earnings release on Apr 20.

For 2016, Illinois Tool Works increased its earnings guidance to $5.40−$5.60 from the previous expectation of $5.35−$5.55 per share. Organic revenue growth is expected to be 1−3%. Operating margin will likely be over 22.5%, driven by a contribution of at least 100 bps from the company’s enterprise initiatives. Also, the company intends to repurchase shares worth $2 billion during the year.

Going forward, Illinois Tool Works’ organic growth tactics, long-term Enterprise Strategy and sound capital allocation schemes should prove beneficial. Also, the acquisition of EF&C business will boost the company’s product offerings under its Automotive OEM segment.

Estimate Revisions

Over the last 60 days, the Zacks Consensus Estimate for Illinois Tool Works grew 1.1% to $5.53 for 2016 and 1.2% to $6.06 for 2017. These estimates represent year-over-year growth of 7.7% for 2016 and 9.6% for 2017. Also, the company has an Earnings ESP of +2.31% for 2017.
 
With a market capitalization of $38.3 billion, Illinois Tool Works currently carries a Zacks Rank #3 (Hold). Some stocks worth considering in the machinery industry include Gorman-Rupp Co. (GRC - Free Report) , Kadant Inc. (KAI - Free Report) and Luxfer Holdings PLC (LXFR - Free Report) . All these stocks sport a Zacks Rank #1 (Strong Buy).

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