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Illinois Tool (ITW) to Report Q4 Earnings: Is a Beat in Store?

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Illinois Tool Works Inc. (ITW - Free Report) is scheduled to release fourth-quarter 2020 results on Feb 5, before market open.

The company delivered better-than-expected results in the last four quarters, the earnings surprise being 21.76%, on average. In the last reported quarter, its earnings of $1.83 surpassed the Zacks Consensus Estimate of $1.45 by 26.21%.

In the past three months, shares of the industrial products and equipment manufacturer have lost 2.2% compared with the industry’s growth of 9.5%.




 

Let us delve deeper.

Key Factors & Estimates for Q4

Illinois Tool’s fourth-quarter 2020 results are expected to reflect gains from solid product offerings, a diversified business structure and an efficient management team. Also, its enterprise strategy — including Business Structure Simplification, Portfolio Management and Strategic Sourcing — are anticipated to have been a boon. Notably, enterprise strategy boosted the company’s operating margin by 100 basis points (bps) in the second quarter and by 120 bps in the third quarter.

In addition, the impacts of the company’s cost-management actions and healthy liquidity position are expected to get reflected in the quarter’s results. On the broader aspect, improvement in manufacturing activities in the country is expected to have benefitted players like Illinois Tool.

Key indicators supporting this belief are manufacturing output, which increased 11.2% in the fourth quarter of 2020, and ISM Purchasing Managers' Index, which grew from 55.4% in September to 60.7% in December.

On the flip side, Illinois Tool’s activities are exposed to the challenges related to the pandemic. Also, the company expects seasonality, typical of the fourth quarter, and higher tax rates to hurt results. Lower shipping days are also expected to have ailed.

The Zack Consensus Estimate for the company’s fourth-quarter earnings is pegged at $1.77 per share, indicating a fall of 5.9% from the year-ago reported figure and a 3.3% dip sequentially. Also, the consensus estimate for revenues of $3,305 million suggests a 4.7% decrease from the year-ago quarter’s reported number and a 0.1% 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 third-quarter 2020 results — is provided below.

The Zacks Consensus Estimate for Automotive OEM’s revenues is pegged at $710 million for the fourth quarter, suggesting a 2.1% fall from the year-ago quarter’s reported figure and a 0.6% decline sequentially.

The consensus estimate for the Test & Measurement and Electronics segment’s revenues stands at $489 million, suggesting an 11.4% decline from the year-ago reported figure and unchanged from the previous quarter.

Further, the consensus estimate for the Construction Products segment’s revenues stands at $404 million for the fourth quarter, suggesting a 5.2% increase from the year-ago reported figure and an 11.4% 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 +0.71%, with the Most Accurate Estimate of $1.78 is above the Zacks Consensus Estimate of $1.77.

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.

AGCO Corporation (AGCO - Free Report) has an Earnings ESP of +3.34% and it presently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Rexnord Corporation (RXN - Free Report) currently has an Earnings ESP of +5.05% and a Zacks Rank #3.

The Middleby Corporation (MIDD - Free Report) presently has an Earnings ESP of +8.67% and a Zacks Rank #2.

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