ITW Outlines its Outlook

Illinois Tool Works Inc. ( ITW - Analyst Report ) in its recently held annual investors’ meeting announced a revision in its guidance (issued in October 2012) for the fourth quarter and the full year 2012.

Though revenue growth outlook was kept unchanged at (1%)-(4%) for the fourth quarter and 0%-1.0% for 2012, the company increased its guidance for earnings per share from continuing operations from a range of 86-94 cents to $1.99-$2.09. For 2012, earnings per share are now projected to be within $5.19-$5.29 range as compared with $4.06-$4.14 expected earlier.

The revised earnings guidance includes net gains from the divestiture of Decorative Surfaces as well as equity interest on it. Excluding these, the company also takes into account some discrete corporate and tax items, taking its earnings guidance to the 86-94 cents range for the fourth quarter and $4.06-$4.14 for 2012.

Revisions were also seen in tax rate that went up from the 28.5%-29.5% range to the 33.5%-34.5% range for the fourth quarter and from the range of 28.5%-29.5% to 30.5%-31.5% range for 2012. Restructuring expenses for the year was reiterated at the $100-$110 million range.

For 2013, the company came up with its organic revenue growth forecast in the range of 1% to 3%. Sales in North America is expected to grow 2% to 4% while Asia Pacific & Other in the range of 2% to 4%. European business is predicted to remain flat.

Illinois Tool’s goals for a five year period from 2012 to 2017 were also declared at the meeting. The company targets the following: organic growth to be 200 basis points above industrial production by 2017; operating margins and return on invested capital to be above 20% by 2017; 100% free cash flow conversion and 12% earnings per share CAGR beyond 2017.

Illinois Tool Works is one of the leading manufacturers of industrial products and equipment operating through 800 business units in 57 countries. We currently maintain a Neutral recommendation on the company. The stock also bears a Zacks #3 Rank, implying a short-term Hold rating. Its prime competitor General Electric Co. ( GE - Analyst Report ) has a Zacks #4 Rank (Sell) while Manitowoc Co. Inc. ( MTW - Analyst Report ) has a Zacks #3 (Hold) Rank.