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Reasons Why You Should Retain Illinois Tool (ITW) for Now

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Illinois Tool Works Inc. (ITW - Free Report) stands to gain from diversified businesses and solid product offerings in the quarters ahead despite supply-chain woes, increasing costs and high tax rates. Its enterprise strategy, including business structure simplification and portfolio management, is expected to be beneficial in the near term. For 2022, ITW anticipates organic sales to expand 7-10%. Earnings are expected to be $9.00-$9.40 per share, suggesting an increase of 6-10% from the previous year’s level.

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 3% year over year. For 2022, management predicts the MTS buyout to boost sales 3%.

ITW’s healthy cash position enables it to reward its shareholders handsomely.  In second-quarter 2022, it paid out dividends of $1.22 per share to its shareholders, representing an increase of 7% from the year-ago period’s level. Also, in the first six months of 2022, Illinois Tool’s cash flow from operating activities totaled $824 million, while free cash flow was $669 million. For 2022, it anticipates free cash flow growth of 10-20%, with the conversion rate accounting for 85-95% of net income, from the year-ago reported figure.

Considering the above-mentioned positives, we believe, investors should retain the Illinois Tool stock for now, as is suggested by its current Zacks Rank #3 (Hold).

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 (Strong Buy). AIT delivered a trailing four-quarter earnings surprise of 22.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks.

AIT’s earnings estimates have increased 6.7% for fiscal 2023 (ending June 2023) in the past 60 days. Its shares have inched up 3.2% in the past six months.

Greif, Inc. (GEF - Free Report) presently has a Zacks Rank #2 (Buy). GEF delivered a trailing four-quarter earnings surprise of 22.4%, on average.

GEF’s earnings estimates have increased 4.6% for fiscal 2022 (ending October 2022) in the past 60 days. Its shares have risen 10.4% in the past six months.

Valmont Industries, Inc. (VMI - Free Report) presently has a Zacks Rank of 2. VMI’s earnings surprise in the last four quarters was 13.7%, on average.

In the past 60 days, Valmont’s earnings estimates have increased 3.8% for 2022. The stock has rallied 18.6% in the past six months.

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