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Illinois Tool (ITW) Beats Q3 Earnings & Revenues, View Up
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Industrial tool maker Illinois Tool Works Inc. (ITW - Free Report) reported record results for third-quarter 2016. Earnings came in at $1.50 per share, roughly 0.7% above the Zacks Consensus Estimate of $1.49. Also, the bottom line exceeded the mid-point of the guidance range of $1.42−$1.52.
The company’s bottom line improved 7.9% from the year-ago figure of $1.39 on the back of a 3.2% reduction in the company’s share count due to its ongoing share buyback activity. Earnings were also boosted by its enterprise initiatives. However, unfavorable foreign currency movements adversely impacted results by 2 cents.
Illinois Tool Works’ revenues totaled approximately $3.50 billion, surpassing the Zacks Consensus Estimate of $3.49 billion, and increasing roughly 4.2% year over year. The improvement was driven by 3.5% positive impact from divestiture gains and 1.6% organic revenue growth. The organic revenue growth included roughly 1% adverse impacts of the company’s Product Line Simplification initiative. However, the positives were partially offset by 0.9% adverse impact from unfavorable foreign currency movements
Geographically, Illinois Tool Works’ organic revenue grew 1% in North America and 3% in international markets.
Segmental Details
Illinois Tool Works reports its revenues under the segments discussed below:
Test & Measurement and Electronics’ revenues increased 5.3% year over year to $516 million, and revenues from Automotive OEM (Original Equipment Manufacturer) were up 24.8% to $765 million. Food Equipment generated revenues of $544 million, down 1.3% year over year.
Welding revenues came in at $361 million, down 8.9% year over year. Construction Products’ revenues were up 1.6% to $415 million, while revenues of $477 million from Specialty Products reflected a decline of 0.6%. Polymers & Fluids’ revenues of $422 million were flat year over year.
Margins
In the quarter, Illinois Tool Works’ cost of sales increased 3.8% year over year, representing 58% of total revenue compared with 58.2% in the year-ago quarter. Selling, administrative, and research and development expenses, as a percentage of total revenue, came in at 17.3%.
Operating margin improved 40 basis points (bps) year over year to 23.1%, driven by roughly 120 bps contributions from Illinois Tool Works' enterprise initiatives. Excluding dilution of 80 bps caused by the acquisition of the Engineered Fasteners and Components business (EF&C) from ZF TRW, operating margin in the quarter was 23.9%.
Balance Sheet & Cash Flow
Exiting the third quarter, Illinois Tool Works had cash and cash equivalents of approximately $2,299 million, down from $2,355 million in the previous quarter. The company’s long-term debt increased 0.5% sequentially to $6,329 million.
In the quarter, Illinois Tool Works generated net cash of $624 million from its operating activities, down 11.6% year over year. Capital expenditure on purchase of plant and equipment totaled $81 million, resulting in free cash flow of $543 million.
During the quarter, Illinois Tool Works bought back shares worth $500 million, while paid dividends at the rate of 65 cents per share.
Outlook: For 2016, Illinois Tool Works increased its earnings guidance to $5.56−$5.66 per share from the previous projection of $5.50−$5.70. The revised forecast represents a 9% year-over-year increase.
Organic revenue growth is expected to be 1−2%, including approximately 1% adverse impacts of the company’s Product Line Simplification initiative. Total revenue will likely total $13.7 billion. Operating margin is expected to exceed 22.5%, driven by 100 bps contribution from Illinois Tool Works’ enterprise initiatives. Full year free cash flow is anticipated to be 100% of net income, while share repurchase will likely be roughly $2 billion.
For fourth-quarter 2016, Illinois Tool Works expects earnings per share to be within $1.31−$1.41. Organic revenue growth is predicted to be 0−2% while operating margin will be roughly 21.5%.
With a market capitalization of $41.1 billion, Illinois Tool Works Inc. carries a Zacks Rank #3 (Hold). Some stocks worth considering in the machinery industry include Nordson Corporation (NDSN - Free Report) , Barnes Group (B - Free Report) and Altra Industrial Motion Corp . While Nordson Corporation sports a Zacks Rank #1 (Strong Buy), both Barnes Group and Altra Industrial Motion carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Nordson Corporation’s financial performance has been impressive, with an average positive earnings surprise of 9.13% for the last four quarters. Also, earnings estimates for fiscal 2016 and fiscal 2017 have been revised upward over the last 60 days.
Barnes Group reported better-than-expected results in the last quarter, with a positive earnings surprise of 6.78%. Also, bottom-line expectations for 2017 have improved over the past 60 days.
Altra Industrial Motion has a solid earnings surprise history, with an average of 9.20% for the last four quarters.
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Illinois Tool (ITW) Beats Q3 Earnings & Revenues, View Up
Industrial tool maker Illinois Tool Works Inc. (ITW - Free Report) reported record results for third-quarter 2016. Earnings came in at $1.50 per share, roughly 0.7% above the Zacks Consensus Estimate of $1.49. Also, the bottom line exceeded the mid-point of the guidance range of $1.42−$1.52.
The company’s bottom line improved 7.9% from the year-ago figure of $1.39 on the back of a 3.2% reduction in the company’s share count due to its ongoing share buyback activity. Earnings were also boosted by its enterprise initiatives. However, unfavorable foreign currency movements adversely impacted results by 2 cents.
Illinois Tool Works’ revenues totaled approximately $3.50 billion, surpassing the Zacks Consensus Estimate of $3.49 billion, and increasing roughly 4.2% year over year. The improvement was driven by 3.5% positive impact from divestiture gains and 1.6% organic revenue growth. The organic revenue growth included roughly 1% adverse impacts of the company’s Product Line Simplification initiative. However, the positives were partially offset by 0.9% adverse impact from unfavorable foreign currency movements
Geographically, Illinois Tool Works’ organic revenue grew 1% in North America and 3% in international markets.
Segmental Details
Illinois Tool Works reports its revenues under the segments discussed below:
Test & Measurement and Electronics’ revenues increased 5.3% year over year to $516 million, and revenues from Automotive OEM (Original Equipment Manufacturer) were up 24.8% to $765 million. Food Equipment generated revenues of $544 million, down 1.3% year over year.
Welding revenues came in at $361 million, down 8.9% year over year. Construction Products’ revenues were up 1.6% to $415 million, while revenues of $477 million from Specialty Products reflected a decline of 0.6%. Polymers & Fluids’ revenues of $422 million were flat year over year.
Margins
In the quarter, Illinois Tool Works’ cost of sales increased 3.8% year over year, representing 58% of total revenue compared with 58.2% in the year-ago quarter. Selling, administrative, and research and development expenses, as a percentage of total revenue, came in at 17.3%.
Operating margin improved 40 basis points (bps) year over year to 23.1%, driven by roughly 120 bps contributions from Illinois Tool Works' enterprise initiatives. Excluding dilution of 80 bps caused by the acquisition of the Engineered Fasteners and Components business (EF&C) from ZF TRW, operating margin in the quarter was 23.9%.
Balance Sheet & Cash Flow
Exiting the third quarter, Illinois Tool Works had cash and cash equivalents of approximately $2,299 million, down from $2,355 million in the previous quarter. The company’s long-term debt increased 0.5% sequentially to $6,329 million.
In the quarter, Illinois Tool Works generated net cash of $624 million from its operating activities, down 11.6% year over year. Capital expenditure on purchase of plant and equipment totaled $81 million, resulting in free cash flow of $543 million.
During the quarter, Illinois Tool Works bought back shares worth $500 million, while paid dividends at the rate of 65 cents per share.
Outlook: For 2016, Illinois Tool Works increased its earnings guidance to $5.56−$5.66 per share from the previous projection of $5.50−$5.70. The revised forecast represents a 9% year-over-year increase.
Organic revenue growth is expected to be 1−2%, including approximately 1% adverse impacts of the company’s Product Line Simplification initiative. Total revenue will likely total $13.7 billion. Operating margin is expected to exceed 22.5%, driven by 100 bps contribution from Illinois Tool Works’ enterprise initiatives. Full year free cash flow is anticipated to be 100% of net income, while share repurchase will likely be roughly $2 billion.
For fourth-quarter 2016, Illinois Tool Works expects earnings per share to be within $1.31−$1.41. Organic revenue growth is predicted to be 0−2% while operating margin will be roughly 21.5%.
ILL TOOL WORKS Price, Consensus and EPS Surprise
ILL TOOL WORKS Price, Consensus and EPS Surprise | ILL TOOL WORKS Quote
Zacks Rank & Stocks to Consider
With a market capitalization of $41.1 billion, Illinois Tool Works Inc. carries a Zacks Rank #3 (Hold). Some stocks worth considering in the machinery industry include Nordson Corporation (NDSN - Free Report) , Barnes Group (B - Free Report) and Altra Industrial Motion Corp . While Nordson Corporation sports a Zacks Rank #1 (Strong Buy), both Barnes Group and Altra Industrial Motion carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Nordson Corporation’s financial performance has been impressive, with an average positive earnings surprise of 9.13% for the last four quarters. Also, earnings estimates for fiscal 2016 and fiscal 2017 have been revised upward over the last 60 days.
Barnes Group reported better-than-expected results in the last quarter, with a positive earnings surprise of 6.78%. Also, bottom-line expectations for 2017 have improved over the past 60 days.
Altra Industrial Motion has a solid earnings surprise history, with an average of 9.20% for the last four quarters.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>