ITW Beats Zacks Consensus

Illinois Tool Works Inc. (ITW - Analyst Report) reported modest third quarter results before the opening bell today amid an environment of generally weak end markets. 

Operating revenues for the quarter stood at $3.580 billion, which were 19.8% lower than the year-ago period but better than the second quarter as worldwide end markets continued to stabilize. The company's base revenues declined 17.9% versus a year-ago quarter, with North American base revenues decreasing 21.6% and international base revenues declining 13.8%.

Acquisitions added 3.6% to revenues while translation negatively impacted revenues 5.6% in the third quarter. Operating margins of 13.5% were 150 basis points lower than the year-ago quarter, base margins actually improved by 20 basis points in the quarter. Income per share from continuing operations of 60 cents was 33% lower than the year-ago period. It was above the Zacks Consensus estimate of 53 cents.

The company's strong third quarter free operating cash flow of $516 million was largely driven by the strong improvement in margins and further reductions in working capital. In the quarter, the free operating cash flow to net income conversion rate was 171%. Year-to-date free operating cash flow totaled $1.466 billion, representing a conversion rate of 333%.

The company incurred $31 million of restructuring expense in the quarter, bringing year-to-date restructuring total to $128 million. Illinois Tool expects to incur between $25 million and $40 million of restructuring in the fourth quarter. The cumulative benefits of these restructuring programs will continue to help the company in the fourth quarter and in 2010.

Looking ahead, the company is forecasting fourth quarter income per share from continuing operations to be in a range of 54 cents to 66 cents. The forecast assumes a total revenue range of -1% to +5% versus the third quarter of 2009.

Read the full analyst report on ITW