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Illinois Tool (ITW) Exhibits Strong Prospects, Endures Risks

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Illinois Tool Works Inc. (ITW - Free Report) is likely to gain from its presence in the diverse end markets, which allows it to nullify risks associated with a single market. In the quarters ahead, strength in ITW’s end markets, including automotive, maintenance, repair, and overhaul, and heavy industry applications and others, is likely to benefit Illinois Tool. Also, ITW’s enterprise strategies, including Portfolio Management and Business Structure Simplification, are likely to drive its performance.

Illinois Tool believes in strengthening its businesses through addition of assets. The acquisition of MTS Systems Corporation’s test and simulation business in December 2021 added value to ITW’s Test & Measurement and Electronics segment. The MTS buyout boosted its sales by 2.8% year over year.

ITW focuses on rewarding its shareholders through dividend payments and share repurchases. In first-quarter 2022, Illinois Tool used $382 million for paying out dividends and repurchasing shares worth $375 million. In August 2021, the quarterly dividend rate was hiked 7%.

Challenges related to supply chain and cost woes pose a concern. ITW’s sales in the Automotive OEM segment decreased due to the impact of supply-chain restrictions on auto production in the first quarter of 2022. These adversities are expected to persist in the near term too.

Illinois Tool’s global presence exposes it to various environmental laws and regulations in the countries where it operates. Also, the entity remains vulnerable to foreign-currency and geopolitical issues. Forex woes hampered sales by 2.2% year over year in the March quarter. In the quarters ahead, ITW's overseas business might be depressed by a stronger U.S. dollar.

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In the past three months, this currently Zacks Rank #3 (Hold) stock has dipped 4.1% compared with the industry’s decline of 11%.

Zacks Rank & Stocks to Consider

Some better-ranked companies from the industrial products sector are discussed below.

Applied Industrial Technologies, Inc. (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 5.9% for fiscal 2022 (ending June 2022) in the past 60 days. Its shares have rallied 8.6% in the past three months.

Roper Technologies, Inc. (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 declined 2.3% in the past three months.

Ferguson plc (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 2.8% for fiscal 2022 (ending July 2022). The same has declined 21.1% in the past three months.