Post Earnings Coverage as Illinois Tool Works Quarterly Sales Jumped 6%; EPS Climbed 19%

Upcoming AWS Coverage on Dover Post-Earnings Results

LONDON, UK / ACCESSWIRE / April 27, 2017 / Active Wall St. announces its post-earnings coverage on Illinois Tool Works Inc. (NYSE: ITW). The Company released its first quarter fiscal 2017 results on April 24, 2017. The Industrial tool maker surpassed top- and bottom-line expectations. Register with us now for your free membership at:

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One of Illinois Tool Works’ competitors within the Diversified Machinery space, Dover Corp. (NYSE: DOV), released its Q1 quarter 2017 earnings results on Thursday, April 20, 2017. AWS will be initiating a research report on Dover in the coming days.

Today, AWS is promoting its earnings coverage on ITW; touching on DOV Get our free coverage by signing up to:

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Earnings and Operating Results

For the quarter ended March 31, 2017, Illinois Tool’s revenue grew 6.0% to $3.47 billion compared to revenue of $3.27 billion in Q1 2016. The Company’s organic revenue increased 3.5% in the reported quarter while the 2016 acquisition of Engineered Fasteners & Components (EF&C) added 3.8% to revenue, offset by foreign currency impact which reduced revenue by 1.3%. Illinois Tool’s revenue numbers exceeded analysts’ consensus of $3.40 billion.

For Q1 2017, Illinois Tool’s operating income was $809 million, an increase of 12% on a y-o-y basis, the highest quarterly total in the Company’s 105-year history. Illinois Tool’s operating margin for the reported quarter was 23.3%, up 120 basis points compared to the year ago same period. Excluding the margin impact from the 2016 acquisition of EF&C, operating margin was 23.8%, an increase of 170 basis points y-o-y with 100 basis points of structural margin improvement from Enterprise Initiatives. The Company’s after-tax return on invested capital was 23.8%, an improvement of 260 basis points.

For Q1 2017, Illinois Tool’s reported earnings of $536 million compared to earnings of $468 million in Q1 2016. On a per-share basis, the Glenview, Illinois-headquartered Company reported earnings of $1.54, up 19% compared to earnings of $1.29 million in the year ago comparable period. Earnings results topped Wall Street’s expectations of $1.45 per share.

Segment Results

For Q1 2017, Illinois Tool’s Automotive OEM revenue surged 26% to $828 million, the segment delivered above-plan organic revenue growth of 9%, 300 basis points above global car builds. In North America, Automotive OEM’s 4% organic growth exceeded auto builds of 3% overall and 1% for the Detroit. Outside North America, growth remained strong, with Europe up 12%, or 600 basis points, above market. China was up 29%, significantly above market. The segment posted operating margin of 24.4%, down 200 basis points compared to the year ago same period.

Illinois Tool’s Food Equipment revenue was almost flat at $497 million for Q1 2017, while it grew 2% organically. North America was up 1%, with stable demand for equipment up 2%. Internationally, both equipment and service were up 3%. The segment’s operating margin improved 60 basis points to 25.1%.

During Q1 2017, Illinois Tool’s Test & Measurement and Electronics revenue jumped 4% to $480 million, while on an organic basis revenue by grew 6%, with strong demand in semiconductor-related end markets. In Test & Measurement’s Instron business, where demand is tied more closely to business investment, organic growth was up 5%. The segment’s operating margin improved 450 basis points to 20.0%. The 20% includes 350 basis points of the noncash expense associated with amortizing acquisition-related intangible assets.

Illinois Tool’s Welding segment’s revenue declined 1% to $387 in Q1 2017, while organic growth was flat, which is a significant improvement versus a decrease of 8% in Q4 2016. Excluding normal seasonality, demand improved 3% sequentially. On a geographical basis North America, which generates approximately 80% of the segment’s business, was up 2%, driven by the Company’s commercial equipment business. Welding segment’s operating margin was the highest in the Company at 27.7% up 380 basis points.

For Q1 2017, Illinois Tool’s Polymers & Fluids delivered revenue growth of 2% generating sales of $426 million. The segment’s fluids unit, which primarily sells highly engineered lubricants and cleaners into industrial and commercial end markets, and Automotive Aftermarket grew 2%. Polymers, which primarily sells adhesives and sealants for industrial MRO and other OEM applications, was essentially flat. Operating margin was 20.6%, which includes 420 basis points of noncash expense associated with amortizing acquisition-related intangible assets.

Illinois Tool’s Construction Products revenue grew 3% organically to $395 million. Demand in North America was solid, with organic growth down 2% on a y-o-y basis. Commercial was down 1% and residential was down 2%. Operating margin improved 150 basis points to 22.5%. The Company’s Specialty Products sales declined 1% to $463 million, while on an organic basis revenue was up 1%, with strong organic growth of 8% in the divisions consumer packaging businesses. Operating margin was 26.9%, an increase of 80 basis points.

Outlook and Key Planning Assumptions

As a result of the Company’s strong results, Illinois Tool’s raised its 2017 full-year guidance. The Company now expects earnings to be in the range of $6.20 to $6.40 per share, up from prior guidance of $6.00 to $6.20 per share, with organic growth of 2% to 4%, up from 1.5% to 3.5%. The Company expects operating margin to exceed 23.5% and free cash flow to exceed 100% of net income. For Q2 2017, Illinois Tool’s is predicting earnings to be in the range of $1.55 to $1.65 per share with organic growth of 2% to 4%.

Stock Performance

At the close of trading session on Wednesday, April 26, 2017, Illinois Tool Works’ share price finished yesterday’s trading session at $139.14, slightly down 0.09%. A total volume of 1.94 million shares exchanged hands, which was higher than the 3 months average volume of 1.33 million shares. The stock has advanced 24.28% and 34.81% in the last six months and past twelve months, respectively. Furthermore, since the start of the year, shares of the Company have gained 14.18%. The stock is trading at a PE ratio of 24.40 and has a dividend yield of 1.87%.

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