ITW Revenue Update, Guidance Intact

Illinois Tool Works Inc. (ITW - Analyst Report) reported a 16% year-over-year rise in operating revenues for the three months ended July 31, 2010. The increase includes a 13% growth attributable to a hike in base revenue and 3% to acquisitions. Currency translation was flat in the quarter. End markets were stable.

Transportation revenue grew by 29% year over year while Industrial Packaging advanced by 18.1%. Power Systems and Electronics registered an increase of 23.1%. Construction Products grew by 16.3% and Polymers and Fluids increased by 16.4%. Revenues from all other sources soared 19.0%. The improvement was partially offset by declines of 2.2% in Food Equipment and 0.9% in Decorative Surfaces.

Illinois Tool Works also reiterated its earnings per share (EPS) from continuing operations guidance for the third quarter 2010 at 72–84 cents. The guidance is based on total revenue growth expectations in the range of 9%–13%. For full-year 2010, the company still hopes that EPS would be within the $2.82–$3.08 range based on revenue growth expectations of 11%–13%.

Illinois Tool Works, operating through 840 business units in 57 countries, is one of the leading manufacturers of industrial products and equipment.  We believe that the company’s growth stems from its ability to develop new and improved products as well as broadening the range of the application of established products. Improvising and developing new methods, processes and equipment along with acquisitions give the company a big push.

Moreover, new products are designed to be more cost-effective by eliminating steps in manufacturing processes, reducing the number of parts in an assembly, or by improving the quality of customers’ assembled products.

Prime competitors include Cooper Industries plc (CBE - Analyst Report), General Electric Co. (GE - Analyst Report), and Manitowoc Co. Inc. (MTW - Analyst Report). We currently maintain our Neutral recommendation on the stock, which is in line with the Zacks #3 Rank ('Hold').

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