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Here's Why You Should Give Illinois Tool (ITW) a Shot Now
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Illinois Tool Works (ITW - Free Report) is benefiting from strong demand across most of its businesses. Strong organic growth in North America, Europe and China is boosting revenues in the Automotive OEM (Original Equipment Manufacturer) segment. The Food Equipment unit is aided by growth across both North America and International operations.
Strength in the capital equipment business bodes well for Illinois Tool’s Test & Measurement and Electronics segment. Solid industrial business bodes well for the Welding segment. Continued strength in industrial applications and automotive aftermarket construction are supporting growth of the Polymers & Fluids segment.
This Zacks Rank #2 (Buy) company expects organic growth of 3-5% for 2023. For 2023, the company expects revenues of $16.2-$16.5 billion. The midpoint of the guided range of $16.35 million implies a 2.8% jump from the 2022 figure of $15.9 billion.
Illinois Tool’s commitment to rewarding shareholders through dividends and share buybacks are encouraging. In August 2022, the company hiked its dividend by 7% to $1.31 per share. In the fourth quarter of 2022, the company paid a dividend of $1.31 per share, representing an increase of 7% from the year-ago period. The company bought back shares of $500 million in the same period.
In 2023, Illinois Tool expects to repurchase $1.5 billion worth of shares. Strong free cash flow generation capacity supports the company’s shareholder-friendly activities. Free cash flow was $655 million in the fourth quarter. The conversion rate was 72%. The company expects a free cash flow to net income conversion rate of 100% for 2023.
Illinois Tool aims to acquire businesses/assets to expand its product offerings, geographical reach, technological expertise and customer base. In December 2021, the company acquired the test and simulation business of MTS Systems Corporation. The buyout strengthened Illinois Tool’s operations in the Test & Measurement and Electronics segment.
In addition to enhancing its product offerings and technical abilities, the acquisition expanded the company’s footprint in various end markets. In fourth-quarter 2022, the MTS buyout boosted the company’s sales by 1% year over year.
Amid the abovementioned tailwinds, shares of Illinois Tool have gained 20.6% in the past six months, outperforming the industry’s 14.2% increase.
Image Source: Zacks Investment Research
Other Key Picks
Some other top-ranked stocks within the broader Industrial Products sector are as follows:
Deere has an estimated earnings growth rate of 31% for the current fiscal year. The stock has gained 13.5% in the past six months.
Ingersoll Rand (IR - Free Report) presently carries a Zacks Rank #2. The company delivered a four-quarter earnings surprise of 8.5%, on average.
Ingersoll Rand has an estimated earnings growth rate of approximately 3% for the current year. The stock has rallied approximately 18% in the past six months.
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Here's Why You Should Give Illinois Tool (ITW) a Shot Now
Illinois Tool Works (ITW - Free Report) is benefiting from strong demand across most of its businesses. Strong organic growth in North America, Europe and China is boosting revenues in the Automotive OEM (Original Equipment Manufacturer) segment. The Food Equipment unit is aided by growth across both North America and International operations.
Strength in the capital equipment business bodes well for Illinois Tool’s Test & Measurement and Electronics segment. Solid industrial business bodes well for the Welding segment. Continued strength in industrial applications and automotive aftermarket construction are supporting growth of the Polymers & Fluids segment.
This Zacks Rank #2 (Buy) company expects organic growth of 3-5% for 2023. For 2023, the company expects revenues of $16.2-$16.5 billion. The midpoint of the guided range of $16.35 million implies a 2.8% jump from the 2022 figure of $15.9 billion.
Illinois Tool’s commitment to rewarding shareholders through dividends and share buybacks are encouraging. In August 2022, the company hiked its dividend by 7% to $1.31 per share. In the fourth quarter of 2022, the company paid a dividend of $1.31 per share, representing an increase of 7% from the year-ago period. The company bought back shares of $500 million in the same period.
In 2023, Illinois Tool expects to repurchase $1.5 billion worth of shares. Strong free cash flow generation capacity supports the company’s shareholder-friendly activities. Free cash flow was $655 million in the fourth quarter. The conversion rate was 72%. The company expects a free cash flow to net income conversion rate of 100% for 2023.
Illinois Tool aims to acquire businesses/assets to expand its product offerings, geographical reach, technological expertise and customer base. In December 2021, the company acquired the test and simulation business of MTS Systems Corporation. The buyout strengthened Illinois Tool’s operations in the Test & Measurement and Electronics segment.
In addition to enhancing its product offerings and technical abilities, the acquisition expanded the company’s footprint in various end markets. In fourth-quarter 2022, the MTS buyout boosted the company’s sales by 1% year over year.
Amid the abovementioned tailwinds, shares of Illinois Tool have gained 20.6% in the past six months, outperforming the industry’s 14.2% increase.
Image Source: Zacks Investment Research
Other Key Picks
Some other top-ranked stocks within the broader Industrial Products sector are as follows:
Deere & Company (DE - Free Report) currently sports a Zacks Rank #1 (Strong Buy). The company pulled off a trailing four-quarter earnings surprise of 4.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks.
Deere has an estimated earnings growth rate of 31% for the current fiscal year. The stock has gained 13.5% in the past six months.
Ingersoll Rand (IR - Free Report) presently carries a Zacks Rank #2. The company delivered a four-quarter earnings surprise of 8.5%, on average.
Ingersoll Rand has an estimated earnings growth rate of approximately 3% for the current year. The stock has rallied approximately 18% in the past six months.