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Analyst Blog

Illinois Tool Works Inc’s (ITW - Analyst Report) board of directors recently authorized the company to buyback approximately $4 billion of common shares, representing roughly 70 million shares based on the May 5 closing share price. No time frame was specified for the execution of the buyback program.

The buyback program is in addition to the company’s existing $3.0 billion plan authorized in August 2007, of which $870 million still remains pending. Besides, the board of directors declared to pay a 34 cent per share of quarterly dividend on July 12 to shareholders as on record June 30.

Illinois Tool Works remains committed to returning value to shareholders via dividend payments and share buybacks. Exiting the first quarter 2011, the company paid roughly $169.2 million of dividends to shareholders; disbursed $636.2 million in the fiscal year 2010 and bought back shares worth $350 million.

Illinois Tool Works is one of the leading manufacturers of industrial products and equipment. We believe Illinois Tool stands at an advantageous position to grow in the quarters ahead as evident from the company’s promising EPS guidance of $4.16-$4.34, with mid-point up 40% year over year and the revenue growth expectation of 16%-18%.

For the second quarter of fiscal 2011, Illinois Tool Works expects EPS to be in a range of $0.99-$1.05, based on total revenue growth expectations in the range of 17%–20%.

It is anticipated that near-term results would be largely influenced by the strengthening end markets, restructuring benefits and share buybacks, offset partially by incremental international sales carrying lower margins compared with domestic sales. Over the medium to long term, prime driving catalysts will include a strong acquisition pipeline and recovery in economic conditions.

The company, operating through 800 business units in 57 countries, is one of the leading manufacturers of industrial products and equipment. The company’s chief competitors include Cooper Industries plc , General Electric Co. (GE - Analyst Report), and Manitowoc Co. Inc. (MTW - Analyst Report).

We currently maintain an Outperform recommendation on the stock.

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