Post Earnings Coverage as Illinois Tool Works Earnings Increase 8%

LONDON, UK / ACCESSWIRE / October 28, 2016 / Active Wall St. announces its post-earnings coverage on Illinois Tool Works Inc. (NYSE: ITW). The company released its financial results for the third quarter fiscal 2016 on October 20 2016. Illinois Tool Works topped revenue and earnings expectations and posted record quarterly operating margin of 23.1% and record quarterly operating income of $808 million. Register with us now for your free membership at: http://www.activewallst.com/register/.

Today, AWS is promoting its earnings coverage on ITW. Get our free coverage by signing up to http://www.activewallst.com/registration-3/?symbol=ITW.

Earnings Reviewed

For the three months ended on September 30th, 2016, Illinois Tool Works reported diluted earnings per share (EPS) of $1.50, an 8% increase compared to the year-ago period. Earnings topped market expectations by a penny and also exceeded the mid-point of guidance range of $1.42 per share to $1.52 per share. The bottom-line also benefitted from the 3.2% reduction in the company’s share count due to its ongoing share buyback activity. Earnings were also boosted by its enterprise initiatives; however, currency translation reduced EPS by $0.02 in the quarter.

Illinois Tool Works’ Q3 2016, revenues totaled approximately $3.50 billion, higher by 4.2% compared to the year ago period and surpassed analysts’ estimate of $3.49 billion. The improvement was driven by 3.5% positive impact from divestiture gains and 1.6% organic revenue growth.

The company’s operating margin increased 40 basis points to 23.1%, including 80 basis points of margin dilution from its Q3 2016 acquisition of Engineered Fasteners & Components (EF&C). Excluding the EF&C dilution impact, Q3 2016 operating margin was 23.9%. Operating income of $808 million was up 6%, and after-tax return on invested capital increased by 140 basis points to 23%. Organic revenue increased 2% and the company’s ongoing Product Line Simplification (PLS) activities reduced organic revenue growth by approximately 1% percentage point.

Segment Results

Illinois Tool Works’ Test & Measurement and Electronics segment’s revenues increased 5.3% on y-o-y basis to $516 million for Q3 2016, while revenues from Automotive Original Equipment Manufacturer unit grew 24.8% to $765 million. The company’s Food Equipment segment generated revenues of $544 million, down 1.3% compared to the year ago period.

During Q3 2016, Illinois Tool Works’ Welding unit reported revenues of $361 million, down 8.9% from Q3 2015. Construction Products’ revenues were up 1.6% to $415 million, while revenues of $477 million from Specialty Products reflected a decline of 0.6%. Polymers & Fluids’ revenues of $422 million were flat y-o-y.

All seven segments achieved operating margin at or above 21% with Food Equipment at 27.4%, Welding at 26.5%, Specialty Products at 26.1%, Automotive OEM at 21.8% (25.5% excluding EF&C), Construction at 22.6%, and Test & Measurement/Electronics and Polymers & Fluids both at 21%.

Looking Forward

Illinois Tool Works raised its FY16 earnings forecast in the range of $5.56 to $5.66, a y-o-y increase of 9% at the mid-point. Operating margin is projected to exceed 22.5%. For Q4 2016, the company expects GAAP EPS to be in a range of $1.31 to $1.41, an increase of 11% at the mid-point. Organic revenue is expected to be 0% to 2%, and operating margin to be approximately 21.5%.

Margins

During Q3 2016, Illinois Tool Works’ cost of sales increased 3.8% on y-o-y basis, representing 58% of total revenue compared with 58.2% in Q3 2015. Selling, administrative, and research and development expenses, as a percentage of total revenue, came in at 17.3%.

Balance Sheet

As of September 30th, 2016, Illinois Tool Works had cash and cash equivalents of approximately $2.30 billion, compared to $2.6 billion in the previous quarter. The company’s long-term debt increased 0.5% sequentially to $6,329 million. In the quarter, Illinois Tool Works generated net cash of $624 million from its operating activities, down 11.6% y-o-y. Free cash flow was solid at 101% of net income. Share repurchases totaled $500 million and the company announced an 18% dividend increase on August 5, 2016.

Stock Performance

Illinois Tool Works’ share price finished yesterday’s trading session at $113.32, slightly down 0.05%. A total volume of 1.67 million shares exchanged hands, which was higher than the 3 months average volume of 1.51 million shares. The stock has advanced 9.63% and 25.79% in the last six months and past twelve months, respectively. Furthermore, since the start of the year, shares of the company have gained 24.30%. The stock is trading at a PE ratio of 21.09 and has a dividend yield of 2.29%.

Active Wall Street:

Active Wall Street (AWS) produces regular sponsored and non-sponsored reports, articles, stock market blogs, and popular investment newsletters covering equities listed on NYSE and NASDAQ and micro-cap stocks. AWS has two distinct and independent departments. One department produces non-sponsored analyst certified content generally in the form of press releases, articles and reports covering equities listed on NYSE and NASDAQ and the other produces sponsored content (in most cases not reviewed by a registered analyst), which typically consists of compensated investment newsletters, articles and reports covering listed stocks and micro-caps. Such sponsored content is outside the scope of procedures detailed below.

AWS has not been compensated; directly or indirectly; for producing or publishing this document.

PRESS RELEASE PROCEDURES:

The non-sponsored content contained herein has been prepared by a writer (the “Author”) and is fact checked and reviewed by a third party research service company (the “Reviewer”) represented by a credentialed financial analyst, for further information on analyst credentials, please email info@activewallst.com. Rohit Tuli, a CFA® charterholder (the “Sponsor”), provides necessary guidance in preparing the document templates. The Reviewer has reviewed and revised the content, as necessary, based on publicly available information which is believed to be reliable. Content is researched, written and reviewed on a reasonable-effort basis. The Reviewer has not performed any independent investigations or forensic audits to validate the information herein. The Reviewer has only independently reviewed the information provided by the Author according to the procedures outlined by AWS. AWS is not entitled to veto or interfere in the application of such procedures by the third-party research service company to the articles, documents or reports, as the case may be. Unless otherwise noted, any content outside of this document has no association with the Author or the Reviewer in any way.

NO WARRANTY

AWS, the Author, and the Reviewer are not responsible for any error which may be occasioned at the time of printing of this document or any error, mistake or shortcoming. No liability is accepted whatsoever for any direct, indirect or consequential loss arising from the use of this document. AWS, the Author, and the Reviewer expressly disclaim any fiduciary responsibility or liability for any consequences, financial or otherwise arising from any reliance placed on the information in this document. Additionally, AWS, the Author, and the Reviewer do not (1) guarantee the accuracy, timeliness, completeness or correct sequencing of the information, or (2) warrant any results from use of the information. The included information is subject to change without notice.

NOT AN OFFERING

This document is not intended as an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed, and is to be used for informational purposes only. Please read all associated disclosures and disclaimers in full before investing. Neither AWS nor any party affiliated with us is a registered investment adviser or broker-dealer with any agency or in any jurisdiction whatsoever. To download our report(s), read our disclosures, or for more information, visit http://www.activewallst.com/disclaimer/.

CONTACT

For any questions, inquiries, or comments reach out to us directly. If you’re a company we are covering and wish to no longer feature on our coverage list contact us via email and/or phone between 09:30 EDT to 16:00 EDT from Monday to Friday at:

Email: info@activewallst.com
Phone number: 1-858-257-3144

Office Address: 3rd floor, 207 Regent Street, London, W1B 3HH, United Kingdom

CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.

SOURCE: Active Wall Street

ReleaseID: 447869