I llinois Tool Works Inc. ( ITW Quick Quote ITW - Free Report) ) reported better-than-expected first-quarter 2022 results. Its earnings surpassed estimates by 1.9% while sales beat the same by 4.6%. The industrial tool maker’s adjusted earnings (excluding a 5-cent impact of unfavorable foreign currency translation) in the quarter were $2.11, surpassing the Zacks Consensus Estimate of $2.07. Earnings were flat with the year-ago figure. Revenue Details Illinois Tool generated revenues of $3,939 million in the reported quarter, reflecting growth of 11.2% from the year-ago figure. The top-line results benefited from a 10.6% increase in organic sales and a 2.8% contribution from the MTS acquisition. Foreign currency movements had an adverse impact of 2.2%. Except for the Automotive OEM segment, sales increase in other segments supported the quarterly sales rise of 11.2%. Supply-chain restrictions had adverse impacts on auto production and hence, affected Automotive OEM in the quarter. The top line surpassed the Zacks Consensus Estimate of $3,767 million. Illinois Tool reports revenues under the segments discussed below: Test & Measurement and Electronics’ revenues in the first quarter increased 8% year over year to $685 million. Revenues from Automotive OEM (Original Equipment Manufacturer) declined 1% to $760 million. Food Equipment generated revenues of $ 566 million, increasing 28% year over year. Welding revenues were $450 million, growing 13% year over year. Construction Products’ revenues were up 21% to $551 million. Revenues of $452 million from Specialty Products reflected an increase of 1%. Polymers & Fluids’ revenues of $481 million grew 13% year over year. Margin Profile In the reported quarter, Illinois Tool’s cost of sales increased 15.6% year over year to $2,357 million. It represented 59.8% of the quarter’s revenues compared with 57.5% in the year-ago quarter. Selling, administrative, and research and development expenses expanded 15.2% to $652 million. The same represented 16.6% of first-quarter revenues compared with 16% in the year-ago quarter. The operating margin was 22.7% in the quarter, down 280 basis points (bps) year over year. Enterprise initiatives contributed 90 bps to the operating margin, while price/cost had an adverse impact of 250 bps. Interest expenses in the quarter decreased 7.7% year over year to $48 million. The effective tax rate in the quarter was 23.1%. Balance Sheet and Cash Flow Exiting the first quarter, Illinois Tool had cash and cash equivalents of $1,296 million, down 15.1% from $1,527 million recorded at the end of the last reported quarter. Long-term debt decreased 1.3% sequentially to $6,817 million. In the first three months of 2022, Illinois Tool generated net cash of $323 million from operating activities, reflecting a decline of 47% from the previous-year quarter’s figure. Capital spending on the purchase of plant and equipment was $74 million, up 8.8% year over year. Free cash flow was $249 million, reflecting a year-over-year decline of 54%. Outlook For 2022, Illinois Tool expects organic revenue growth of 7-10% and an 8.5-11.5% rise in total revenues from the respective year-ago actuals. Foreign currency translation is expected to adversely impact sales by 1.5%, while the MTS acquisition is likely to boost the top line by 3%. Earnings (GAAP) are expected to be $9.00-$9.40 per share, suggesting an increase of 11-16% (excluding the impact of one-time favorable tax items in 2021) from the previous year’s reported number. The operating margin is expected to be 24-25%. Enterprise initiatives are likely to contribute 100 bps to the operating margin. However, dilution from price/costs and MTS buyouts are predicted to lower the margin 100 bps and 50 bps, respectively. In the year, Illinois Tool intends to repurchase $1.5 billion worth of shares. The tax rate (effective) is expected to be 23-24%. Zacks Rank & Stocks to Consider With a market capitalization of $23.6 billion, ITW currently carries a Zacks Rank #3 (Hold). Some better-ranked companies from the industrial products sector are discussed below. Applied Industrial Technologies, Inc. ( AIT Quick Quote AIT - Free Report) ) presently sports a Zacks Rank #1. AIT delivered a trailing four-quarter earnings surprise of 25.4%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here . AIT’s earnings estimates have increased 5.4% for fiscal 2022 (ending June 2022) in the past 60 days. Its shares have increased 3.7% in the past three months. Roper Technologies, Inc. ( ROP Quick Quote ROP - Free Report) ) presently has a Zacks Rank #2 (Buy). Its earnings surprise in the last four quarters was 2%, on average. In the past 60 days, ROP’s earnings estimates have increased 1.1% for 2022. The stock has decreased 0.4% in the past three months. Ferguson plc ( FERG Quick Quote FERG - Free Report) ) is presently Zacks #2 Ranked. FERG’s earnings surprise in the last four quarters was 14.2%, on average. In the past 60 days, the stock’s earnings estimates have increased 6.5% for fiscal 2022 (ending July 2022). The same has declined 21% in the past three months.