We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Illinois Tool's Business Diversity & Solid View Raise Appeal
Read MoreHide Full Article
We issued an updated research report on industrial tool maker, Illinois Tool Works Inc. (ITW - Free Report) on Dec 26. We believe that a diversified business structure and synergistic benefits from acquired assets make this stock an attractive choice for investors seeking exposure in the machinery industry. Also, the projections for 2018 and for five years ending 2022 add to its appeal.
It currently carries a Zacks Rank #2 (Buy).
Illinois Tool’s financial performance was better than expected in the last four quarters. The company’s average positive earnings surprise was 3.29%. The stock’s Zacks Consensus Estimate is currently pegged at $6.67 for 2017 and $7.23 for 2018, representing growth of 0.3% and 1.1% from their respective tallies 60 days ago.
Also, market sentiments have been positive for Illinois Tool with the stock yielding 13.1% return in the last three months. This gain is above 8.1% growth of the industry it belongs to.
Below we discuss why investors should consider adding Illinois Tool’s stock to their portfolio.
Long-Term Vision: At its Investor Day 2017, Illinois Tool provided an insight on its long-term growth targets. For the five years from 2018 to 2022, it anticipates gaining from its solid product portfolio and growth strategies. Organic revenue is predicted to grow in the 3-5% range. Margin profile will be solid, with operating margin estimated to be in excess of 25%. Earnings per share are anticipated to grow 8-10% each year.
After-tax return on invested capital is projected to be above 20%. Free cash flow will likely be more than 100% of net income. By 2020, the company anticipates distributing 50% of its free cash flow, up from the current distribution rate of 43%.
Projections for ’17 Reiterated, Initiated for ’18: At its Investor Day, Illinois Tool reaffirmed its projections for 2017, anticipating earnings per share to be within the $6.62-$6.72 per share range. The guidance reflects growth of 17% at mid-point from the previous year. Total revenues are anticipated to be approximately $14.3 billion. Organic revenue growth is expected to be 2-3% while operating margin is expected to be roughly 24.5%.
Additionally, the company initiated its financial guidance for 2018. GAAP earnings are predicted to be within $7.05-$7.25 per share. Organic revenue growth is predicted to be 3-4% and operating margin to expected to be within the 25-25.5% range.
Competitive Advantage: Diversified business structure has given Illinois Tool a competitive edge over other players in the industry. It currently operates through seven business segments, largely minimizing its risk of loss from poor performance of any single group. Also, a vast customer base in various end markets — automotive original equipment manufacturer, automotive aftermarket, general industrial, commercial food equipment, construction and others — is a positive.
Also, constant efforts for expanding its business internationally have strengthened the company’s growth prospects. Notably, it had operations in more than 57 countries exiting 2016, while derived nearly 55% of net revenues from its operations in Canada/Mexico; Europe, Middle East and Africa; Asia Pacific and South America.
Strategic Initiatives: We believe that Illinois Tool is poised to gain from its 80/20 business process (to focus more on 20% of the items which account for 80% of the value and less on 80% of the items which account for 20% of the value) and from acquisitions of meaningful business for the development of its core segments and creation of new platforms for expanding long-term growth opportunities. Noteworthy is the company’s acquired Engineered Fasteners and Components business of ZF TRW in 2016. This buyout has expanded its product offerings under the Automotive OEM segment.
Additionally, the company’s long-term Enterprise Strategy has enabled it to ensure maximum profitability through the development of new and improved products and reasonable cost control. These strategies include Business Structure Simplification, Portfolio Management and Strategic Sourcing. For 2017, enterprise initiatives are likely to contribute 100 basis points to operating margin growth.
Other Stocks to Consider
Illinois Tool Works currently carries a market capitalization of $57.3 billion. We believe that the above-mentioned positives clearly justify the stock’s current ranking.
Some other stocks worth considering in the industry are Kadant Inc. (KAI - Free Report) , Sun Hydraulics Corporation and Applied Industrial Technologies, Inc. (AIT - Free Report) . While both Kadant and Sun Hydraulics sport a Zacks Rank #1 (Strong Buy), Applied Industrial Technologies is a Zacks #2 Ranked player. You can see the complete list of today’s Zacks #1 Rank stocks here.
Kadant’s earnings estimates for 2017 and 2018 were revised upward in the last 60 days. Also, the company delivered an average positive earnings surprise of 20.32% in the last four quarters.
Sun Hydraulics pulled off an average positive earnings surprise of 9.58% in the last four quarters. Also, its earnings estimates for 2017 and 2018 have improved in the last 60 days.
Applied Industrial Technologies’ earnings estimates for fiscal 2018 and fiscal 2019 remained stable in the last 60 days. Also, the company’s average beat in the trailing four quarters was 9.71%.
Zacks Editor-in-Chief Goes "All In" on This Stock
Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report.
Image: Bigstock
Illinois Tool's Business Diversity & Solid View Raise Appeal
We issued an updated research report on industrial tool maker, Illinois Tool Works Inc. (ITW - Free Report) on Dec 26. We believe that a diversified business structure and synergistic benefits from acquired assets make this stock an attractive choice for investors seeking exposure in the machinery industry. Also, the projections for 2018 and for five years ending 2022 add to its appeal.
It currently carries a Zacks Rank #2 (Buy).
Illinois Tool’s financial performance was better than expected in the last four quarters. The company’s average positive earnings surprise was 3.29%. The stock’s Zacks Consensus Estimate is currently pegged at $6.67 for 2017 and $7.23 for 2018, representing growth of 0.3% and 1.1% from their respective tallies 60 days ago.
Also, market sentiments have been positive for Illinois Tool with the stock yielding 13.1% return in the last three months. This gain is above 8.1% growth of the industry it belongs to.
Below we discuss why investors should consider adding Illinois Tool’s stock to their portfolio.
Long-Term Vision: At its Investor Day 2017, Illinois Tool provided an insight on its long-term growth targets. For the five years from 2018 to 2022, it anticipates gaining from its solid product portfolio and growth strategies. Organic revenue is predicted to grow in the 3-5% range. Margin profile will be solid, with operating margin estimated to be in excess of 25%. Earnings per share are anticipated to grow 8-10% each year.
After-tax return on invested capital is projected to be above 20%. Free cash flow will likely be more than 100% of net income. By 2020, the company anticipates distributing 50% of its free cash flow, up from the current distribution rate of 43%.
Projections for ’17 Reiterated, Initiated for ’18: At its Investor Day, Illinois Tool reaffirmed its projections for 2017, anticipating earnings per share to be within the $6.62-$6.72 per share range. The guidance reflects growth of 17% at mid-point from the previous year. Total revenues are anticipated to be approximately $14.3 billion. Organic revenue growth is expected to be 2-3% while operating margin is expected to be roughly 24.5%.
Additionally, the company initiated its financial guidance for 2018. GAAP earnings are predicted to be within $7.05-$7.25 per share. Organic revenue growth is predicted to be 3-4% and operating margin to expected to be within the 25-25.5% range.
Competitive Advantage: Diversified business structure has given Illinois Tool a competitive edge over other players in the industry. It currently operates through seven business segments, largely minimizing its risk of loss from poor performance of any single group. Also, a vast customer base in various end markets — automotive original equipment manufacturer, automotive aftermarket, general industrial, commercial food equipment, construction and others — is a positive.
Also, constant efforts for expanding its business internationally have strengthened the company’s growth prospects. Notably, it had operations in more than 57 countries exiting 2016, while derived nearly 55% of net revenues from its operations in Canada/Mexico; Europe, Middle East and Africa; Asia Pacific and South America.
Strategic Initiatives: We believe that Illinois Tool is poised to gain from its 80/20 business process (to focus more on 20% of the items which account for 80% of the value and less on 80% of the items which account for 20% of the value) and from acquisitions of meaningful business for the development of its core segments and creation of new platforms for expanding long-term growth opportunities. Noteworthy is the company’s acquired Engineered Fasteners and Components business of ZF TRW in 2016. This buyout has expanded its product offerings under the Automotive OEM segment.
Additionally, the company’s long-term Enterprise Strategy has enabled it to ensure maximum profitability through the development of new and improved products and reasonable cost control. These strategies include Business Structure Simplification, Portfolio Management and Strategic Sourcing. For 2017, enterprise initiatives are likely to contribute 100 basis points to operating margin growth.
Other Stocks to Consider
Illinois Tool Works currently carries a market capitalization of $57.3 billion. We believe that the above-mentioned positives clearly justify the stock’s current ranking.
Some other stocks worth considering in the industry are Kadant Inc. (KAI - Free Report) , Sun Hydraulics Corporation and Applied Industrial Technologies, Inc. (AIT - Free Report) . While both Kadant and Sun Hydraulics sport a Zacks Rank #1 (Strong Buy), Applied Industrial Technologies is a Zacks #2 Ranked player. You can see the complete list of today’s Zacks #1 Rank stocks here.
Kadant’s earnings estimates for 2017 and 2018 were revised upward in the last 60 days. Also, the company delivered an average positive earnings surprise of 20.32% in the last four quarters.
Sun Hydraulics pulled off an average positive earnings surprise of 9.58% in the last four quarters. Also, its earnings estimates for 2017 and 2018 have improved in the last 60 days.
Applied Industrial Technologies’ earnings estimates for fiscal 2018 and fiscal 2019 remained stable in the last 60 days. Also, the company’s average beat in the trailing four quarters was 9.71%.
Zacks Editor-in-Chief Goes "All In" on This Stock
Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report.
Download it free >>