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Illinois Tool (ITW) to Post Q3 Earnings: Beat in the Cards?

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Illinois Tool Works Inc. (ITW - Free Report) is scheduled to release third-quarter 2020 results on Oct 23, before market open.

The company delivered better-than-expected results in each of the last four quarters, with the earnings surprise being 16.5%, on average. In the last reported quarter, its earnings of $1.09 surpassed the Zacks Consensus Estimate of 70 cents by 55.71%.  

In the past three months, shares of this industrial products and equipment manufacturer have gained 11.4% compared with the industry’s growth of 10.6%.

Factors at Play

Illinois Tool is likely to have benefited from a diversified business structure, solid product offerings and focus on supply-chain management in the third quarter. Also, its focus on uninterrupted supply of products in the pandemic era, along with its enterprise strategy, is expected to have been beneficial in the quarter.

Further, strength in the company’s consumer packaging businesses including Zip-Pak products, on the back of surge in demand for consumables, is likely to have augmented its top-line performance. Moreover, Illinois Tool has been benefiting from strategic sales excellence and investments related to innovation programs, which is likely to have supported its performance in the third quarter.

In addition, benefits of various cost-saving measures, undertaken by it to deal with the financial stress caused by the pandemic, are expected to get reflected in the upcoming results.

However, the global market downturn and the overall low demand environment caused by the coronavirus are expected to have had a bearing on the company’s top-line performance in the to-be-reported quarter. Notably, persistent weakness across its Automotive OEM (especially in Western Europe and North America) and Food Equipment segments might have affected its top-line performance.

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

The Zack Consensus Estimate for the company’s third-quarter earnings is pegged at $1.45, indicating a 33% increase from the previous-quarter reported figure, but a 28.9% fall on a year-over-year basis. The consensus estimate for third-quarter revenues of $2,949 million suggests a 15% increase from the last quarter’s figure and a 15.2% decline from the year-ago quarter’s reported number.

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

The Zacks Consensus Estimate for the Automotive OEM segment’s revenues stands at $641 million for the third quarter, suggesting a 77.6% surge from the previous quarter, but a 13.8% decline from the year-ago reported figure.

The consensus estimate for Test & Measurement and Electronics is pegged at $449 million, suggesting a fall of 1.3% from the previous quarter and a decline of 12.3% year over year.

Further, the consensus mark for the Food Equipment segment’s revenues stands at $389 million for the third quarter, suggesting a 15.8% improvement from the previous quarter’s reported figure but a 29.4% fall from the year-ago 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. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The company has an Earnings ESP of +4.14% as the Most Accurate Estimate is pegged at $1.51, higher than the Zacks Consensus Estimate of $1.45.

Illinois Tool Works Inc. Price and EPS Surprise

Illinois Tool Works Inc. Price and EPS Surprise

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

Zacks Rank: Illinois Tool carries a Zacks Rank #3.

Other Key Picks

Here are some other companies that you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat this season:

Altra Industrial Motion Corp. (AIMC - Free Report) has an Earnings ESP of +2.04% and it carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Flowserve Corporation (FLS - Free Report) has an Earnings ESP of +2.56% and it carries a Zacks Rank #2.

Graco Inc. (GGG - Free Report) has an Earnings ESP of +5.48% and a Zacks Rank of 2 at present.

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Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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