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Analyst Blog

Illinois Tool Works Inc. (ITW - Analyst Report) reported a 16% year-over-year rise in its operating revenues for the three months ended August 31, 2011. The increase records a 6% growth, which can be ascribed to a hike in base revenue and 4% to acquisitions.

Currency translation had a positive 6.0% impact on the revenue. End markets were strong with a solid demand for the company’s products.

Transportation revenue grew by 24% year over year, while revenue from Industrial Packaging rose by about 17%. Power Systems and Electronics segment registered an increase of 16%. Construction Products grew by 14% and Polymers and Fluids by 32%. Decorative Surfaces witnessed a13% hike, while Food Equipment grew by 7% year over year. Revenue from all other sources soared 11%.

Additionally, Illinois Tool Works reaffirmed its fiscal year 2011 guidance provided during the release of its second quarter 2011 financial results. Earnings per share (EPS) from continuing operations are expected to be within the $4.05-$4.21 range. The range includes a $0.33 per share benefit related to the settlement of an Australian tax case in 1Q11. Revenue growth is maintained at a range of about 16%-18%.

For the third quarter of fiscal 2011, Illinois Tool reiterated its EPS guidance that ranges within $0.95-$1.03 based on total revenue growth expectations in the range of 15% to 18%.

The current Zacks Consensus Estimate for the third quarter is $0.98, representing a year-over-year increase of 18.37%. Estimates for the fiscal years 2011 and 2012 are $3.78 and $4.32, reflecting annual growth of 24.88% and 14.29%, respectively.

Illinois Tool Works is one of the leading manufacturers of industrial products and equipment. It faces stiff competition from its peers like Cooper Industries plc , General Electric Co. (GE - Analyst Report) and Manitowoc Co. Inc. (MTW - Analyst Report).

We currently maintain a Neutral recommendation on the stock.

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