The U.S. equity market is currently abuzz with the Trump government’s decision to bring in another $200 billion worth of Chinese goods under its import tariff bracket. This news has heightened speculation about the possible ill effects on international trades, if China chooses to retaliate with similar measures.
However, we find a strengthening U.S. housing market, better job market, tax policy changes introduced last year and infrastructural development quite encouraging. Moreover, the country’s industrial production is on the rise. It increased 4.9% year over year in August 2018, way higher than growth of 2.8% registered in January. This clearly signifies an expanding industrial sector, which comprises the outputs of mining, utilities and manufacturing sectors.
The Zacks Industrial Products sector currently offers a number of investment-friendly options. However, one must avoid stocks that currently have poor investment appeal.
Once such stock is Illinois Tool Works Inc. (ITW - Free Report) . The Glenview, IL-based company primarily engages in the manufacturing and distribution of industrial equipments used in various end-markets, including electronics, automotive, commercial food, welding, construction, beverages and others.
In the past year, Illinois Tool’s share price has declined 0.9% versus 11.3% growth of the industry (comprising companies dealing in general industrial machineries) and 5.9% increase in Industrial Products sector.
Year to date, the company’s share price has fallen 12.3%. Much of the damage has been caused by inflation in raw material costs. Anti-inflationary actions, though managed to negate the adverse impacts on a dollar basis, have failed to protect margins. The company predicts its 2018 margins to come within the 24-25% range, down from the previous prediction of 25-25.5%.
Furthermore, softness in North American auto build, uncertainties around global trade and headwinds arising from unfavorable movements in foreign currencies are working against the company. Forex woes are estimated to adversely influence the company’s earnings by 12 cents per share in the second half of 2018. Also, the company has lowered its earnings guidance to $7.50-$7.70 per share from the previous range of $7.60-$7.80.
In addition, a highly leveraged balance sheet can inflate Illinois Tool’s financial obligations and adversely impact its profitability. In the last five years (2013-2017), the company’s long-term debts have jumped 21.8% (CAGR) while was $6.9 billion at the end of first half of 2018. Also, the company’s total debt to total equity has increased from 65.3% in 2013 to 181.5% in 2017 and was 195.9% at the end of the second quarter of 2018.
All the prevailing headwinds have created skepticism about Illinois Tool’s growth prospects, as reflected in the downward revisions in earnings estimates for both 2018 and 2019. In the past 60 days, the company’s earnings estimates have been lowered by 10 brokerage firms for 2018 while have been reduced by nine firms for 2019. Currently, the Zacks Consensus Estimate for earnings is pegged at $7.64 for 2018 and $8.27 for 2019, reflecting decline of 1.5% and 1.8% from the respective tallies 60 days ago.
Illinois Tool Works Inc. Price and Consensus
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
The U.S. equity market is currently abuzz with the Trump government’s decision to bring in another $200 billion worth of Chinese goods under its import tariff bracket. This news has heightened speculation about the possible ill effects on international trades, if China chooses to retaliate with similar measures.
However, we find a strengthening U.S. housing market, better job market, tax policy changes introduced last year and infrastructural development quite encouraging. Moreover, the country’s industrial production is on the rise. It increased 4.9% year over year in August 2018, way higher than growth of 2.8% registered in January. This clearly signifies an expanding industrial sector, which comprises the outputs of mining, utilities and manufacturing sectors.
The Zacks Industrial Products sector currently offers a number of investment-friendly options. However, one must avoid stocks that currently have poor investment appeal.
Once such stock is Illinois Tool Works Inc. (ITW - Free Report) . The Glenview, IL-based company primarily engages in the manufacturing and distribution of industrial equipments used in various end-markets, including electronics, automotive, commercial food, welding, construction, beverages and others.
In the past year, Illinois Tool’s share price has declined 0.9% versus 11.3% growth of the industry (comprising companies dealing in general industrial machineries) and 5.9% increase in Industrial Products sector.
Year to date, the company’s share price has fallen 12.3%. Much of the damage has been caused by inflation in raw material costs. Anti-inflationary actions, though managed to negate the adverse impacts on a dollar basis, have failed to protect margins. The company predicts its 2018 margins to come within the 24-25% range, down from the previous prediction of 25-25.5%.
Furthermore, softness in North American auto build, uncertainties around global trade and headwinds arising from unfavorable movements in foreign currencies are working against the company. Forex woes are estimated to adversely influence the company’s earnings by 12 cents per share in the second half of 2018. Also, the company has lowered its earnings guidance to $7.50-$7.70 per share from the previous range of $7.60-$7.80.
In addition, a highly leveraged balance sheet can inflate Illinois Tool’s financial obligations and adversely impact its profitability. In the last five years (2013-2017), the company’s long-term debts have jumped 21.8% (CAGR) while was $6.9 billion at the end of first half of 2018. Also, the company’s total debt to total equity has increased from 65.3% in 2013 to 181.5% in 2017 and was 195.9% at the end of the second quarter of 2018.
All the prevailing headwinds have created skepticism about Illinois Tool’s growth prospects, as reflected in the downward revisions in earnings estimates for both 2018 and 2019. In the past 60 days, the company’s earnings estimates have been lowered by 10 brokerage firms for 2018 while have been reduced by nine firms for 2019. Currently, the Zacks Consensus Estimate for earnings is pegged at $7.64 for 2018 and $8.27 for 2019, reflecting decline of 1.5% and 1.8% from the respective tallies 60 days ago.
Illinois Tool Works Inc. Price and Consensus
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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