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Illinois Tool (ITW) to Report Q2 Earnings: What's in Store?

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Illinois Tool Works Inc. (ITW - Free Report) is scheduled to release second-quarter 2020 results on Jul 31, before market open.

The company delivered better-than-expected results in the last four quarters, the earnings surprise being 2.95%, on average. In the last reported quarter, its earnings of $1.77 surpassed the Zacks Consensus Estimate of $1.71 by 3.51%.

In the past three months, shares of the industrial products and equipment manufacturer have increased 13.9% compared with the industry’s growth of 16.8%.




 

Let us delve deeper.

Key Factors & Estimates for Q2

Impacts of global market downturn and challenging demand environment caused by the pandemic are expected to get reflected in Illinois Tool Work’s second-quarter 2020 results. Among various businesses, severe damage is expected in automotive OEM (especially in Western Europe and North America), with revenues predicted to fall 60-70% in the quarter.

In addition to these, unfavorable movements in foreign currencies, divestitures and woes related to high debts are expected to have been spoilsports.

However, solid product offerings, a diversified business structure, focus on supply-chain management and gains from enterprise strategy might have aided results. Also, impacts of various cost-saving measures undertaken by the company to deal with the financial stress caused by the pandemic are expected to get reflected in the results.

For the second quarter, Illinois Tool expects second-quarter revenues to decline 30-40% on a year-over-year basis. Operating income in the quarter is expected to be $200-$400 million. Also, liquidity at the quarter-end is predicted to be solid, comprising $1.5 billion of cash on hand and more than $500 million of free cash flow.

The Zack Consensus Estimate for the company’s second-quarter earnings is pegged at 72 cents, indicating a fall of 64% from the year-ago reported figure and a 59.3% dip sequentially. Also, the consensus estimate for revenues of $2,360 million suggests a 34.6% decrease from the year-ago quarter’s reported number and a 26.9% decline from the last reported quarter’s figure.

On a segmental basis, a brief discussion on estimates for the top three revenue-producing segments — based on first-quarter 2020 results — is provided below.

The Zacks Consensus Estimate for the Test & Measurement and Electronics segment’s revenues stands at $404 million for the second quarter, suggesting a 24.2% decline from the year-ago reported figure and a 16.7% fall from the previous quarter.

The consensus estimate for Automotive OEM is at $269 million, suggesting a sharp fall of 65.9% from the year-ago quarter and 61.4% sequentially.

Further, the consensus estimate for the Food Equipment segment’s revenues stands at $297 million for the second quarter, suggesting a 45.8% decline from the year-ago reported figure and a 38.5% fall from the previous quarter.

Earnings Whispers

Our proven model suggests an earnings beat for Illinois Tool this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is exactly the case with Illinois Tool as is shown below. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Illinois Tool has an Earnings ESP of +8.23%, with the Most Accurate Estimate of 78 cents above the Zacks Consensus Estimate of 72 cents.

Illinois Tool Works Inc. Price, Consensus and EPS Surprise

 

Illinois Tool Works Inc. Price, Consensus and EPS Surprise

Illinois Tool Works Inc. price-consensus-eps-surprise-chart | Illinois Tool Works Inc. Quote

Zacks Rank: The company currently carries a Zacks Rank #3.

Other Stocks to Consider

Here are some other companies in the industry that you may want to consider as according to our model these too have the right combination of elements to post an earnings beat this quarter.

Alta Equipment Group Inc. (ALTG - Free Report) presently has an Earnings ESP of +36.84% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Ingersoll Rand Inc. (IR - Free Report) currently has an Earnings ESP of +6.02% and a Zacks Rank #2.

Xylem Inc. (XYL - Free Report) presently has an Earnings ESP of +21.09% and a Zacks Rank #3.

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