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The Zacks Analyst Blog Highlights: Illinois Tool Works, Cooper Industries, General Electric, Manitowoc and NYSE Euronext

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For Immediate Release

Chicago, IL – August 7, 2012 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Illinois Tool Works Inc. (ITW - Analyst Report), Cooper Industries plc , General Electric Co. (GE - Analyst Report), Manitowoc Co. Inc. (MTW - Analyst Report) and NYSE Euronext Inc. .

 

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Here are highlights from Monday’s Analyst Blog:

 

Illinois Tool Works Ups Dividend

 

Illinois Tool Works Inc.’s (ITW - Analyst Report) Board of Directors approved a 6.0% hike in the company’s quarterly dividend rate. The revised quarterly rate now stands at 38 cents per common share compared with 36 cents previously, resulting in an annual rate of $1.52 per common share.

The revised dividend will be paid on October 10 to shareholders of record as of the close of business on September 28.  

Over time, the company has been following a policy of returning cash to its shareholders via dividend payments and share buybacks. In the second quarter of 2012, the company distributed $172 million as dividends and repurchased shares worth $526 million. The company is still left with $2.9 billion in its share buyback program.

Year-to-date, the company has paid roughly $346 million in dividends and bought back shares worth $1 billion.

We believe the company’s strong cash position is supportive of its shareholder-friendly policy. Exiting the second quarter, the company’s cash balance stood at $1,692.0 million and showed a 30% increase over the previous quarter. Also, net cash flow from operating activities was $509.0 million, compared with $312.0 million in the year-ago quarter.

Recently announced, the company’s second quarter 2012 financial results were plagued by higher negative currency translation impact. Though earnings per share surpassed the year-ago earnings by 16% and the Zacks Consensus Estimate by 2 cents, total revenue growth was restricted to just 0.9%. Management, accounting for a negative currency translation impact and higher restructuring charges, lowered its revenue growth and earnings per share guidance.

Management’s earnings per share guidance for the third quarter 2012 stands at $1.03-$1.11, with the Zacks Consensus Estimate near the mid-point at $1.06, up 6.29% year over year. Estimates for 2012 and 2013 are at $4.12 and $4.54, representing year-over-year growth of 0.93% and 10.13%, respectively.

Illinois Tool Works is one of the leading manufacturers of industrial products and equipment operating through 800 business units in 57 countries. It competes with companies like Cooper Industries plc , General Electric Co. (GE - Analyst Report) and Manitowoc Co. Inc. (MTW - Analyst Report).

We currently maintain a Neutral recommendation on Illinois Tool Works. The stock also bears a Zacks #4 Rank, implying a short-term Sell rating.

 

 

S&P Wary of NYSE’s Liquidity

 

Last week, Standard & Poor's Ratings Services (S&P) revised its outlook on NYSE Euronext Inc. to negative from stable, based on the company’s dismal financial performance in the second quarter of 2012. However, the rating agency has asserted the company’s credit ratings for the time being.

Accordingly, S&P affirmed NYSE’s counterparty credit rating at “A+/A-1,” senior unsecured debt at “A+” and its commercial paper at “A-1,” although the outlook now remains negative. The revised outlook elucidates on the rating agency’s creditability, since the company’s cash and operating cash flow appear under pressure and does not look impressive. NYSE has debt obligations worth $750 million in June 2013.

Moreover, the rating agency is already wary of NYSE’s current liquidity. The company’s liquid assets can hardly cover three months’ operating expenses.

NYSE has been wooing its investors with consistent dividends and share buybacks amidst the declining trend of its operating margins and operating cash flow. The company deployed $450 million on share repurchases and dividend payments in the first half of 2012, which were higher than $400 million of funds allotted for operations.

As of June 30, 2012, NYSE’s total debt stood at $2.3 billion, higher than $2.1 billion at 2011-end. At the end of the reported quarter, cash and cash equivalents, investments and other securities were $416 million, down from $432 million at the end of 2011.

As a result of higher capital expenditure and debt, NYSE’s debt-to-EBITDA ratio also deteriorated to 2.1x from 1.6x recorded at the end of 2011, which was the lowest level since the inception of this organization in April 2007.

Further, NYSE reported second-quarter 2012 operating earnings per share of 51 cents, a penny higher than the Zacks Consensus Estimate of 50 cents. However, it was quite lower than 61 cents recorded in the year-ago quarter. Consequently, operating net income plunged 20% year over year to $128 million from $160 million in the year-ago quarter.

Net revenues stood at $602 million, sliding 8.9% from $661 million in the prior-year quarter. It also came lower than the Zacks Consensus Estimate of $606 million. The deteriorating performance was primarily due to decelerated performance across board, particularly weak revenues from transaction, clearing fees and market data, which contribute about 75% to the gross revenue.

 

 

 

 

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