Here's Why You Should Hold Illinois Tool (ITW) Stock for Now
Illinois Tool Works Inc. ITW is gaining from improved performances in the Automotive Original Equipment Manufacturer (OEM) and Food Equipment segments, which have helped offset the softness in the Test & Measurement and Electronics and Specialty Products segments. Decline in costs as well as easing supply chains have aided margins.
Let us discuss the reasons why investors should retain the stock for the time being.
Growth Catalysts
Business Strength: Favorable customer mix and product line simplification activities are boosting revenues in the Automotive OEM segment. The segment’s revenues increased 8.8% year over year in the first nine months of 2023. The Food Equipment unit is being aided by growth in the institutional, food retail and restaurant end markets. Revenues from the segment jumped 8.5% year over year in the first nine months.
Enterprise Initiatives: Decreasing cost of sales and enterprise initiatives are supporting Illinois Tool’s margin performance. The company’s operating margin of 25.2% increased 180 basis points in the first nine months of 2023, as enterprise initiatives contributed 140 basis points. For 2023, ITW expects the operating margin to be 25-25.5%. Enterprise initiatives are expected to contribute more than 100 basis points to the operating margin.
Rewards to Shareholders: The company continues to increase shareholders’ value through dividend payments & share repurchases. In the first nine months of 2023, Illinois Tool bought back shares worth $1.1 billion. In August 2023, the company hiked its dividend by 7% to $1.40 per share. Illinois Tool expects to repurchase $1.5 billion worth of shares in 2023.
Considering the above-mentioned positives, we believe investors should retain the Illinois Tool stock for now, as suggested by its current Zacks Rank #3 (Hold). In the past year, shares of the company have increased 12.1%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked companies from the Industrial Products sector are discussed below:
Flowserve Corporation FLS presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
FLS delivered a trailing four-quarter average earnings surprise of 27.3%. In the past 60 days, the Zacks Consensus Estimate for Flowserve’s 2023 earnings has increased 3.1%. The stock has risen 24.2% in the past year.
Applied Industrial Technologies, Inc. AIT presently carries a Zacks Rank of 2. It has a trailing four-quarter average earnings surprise of 13.9%.
The consensus estimate for AIT’s fiscal 2024 earnings has increased 3.3% in the past 60 days. Shares of Applied Industrial have jumped 30.1% in the past year.
A. O. Smith Corporation AOS currently carries a Zacks Rank of 2. The company delivered a trailing four-quarter average earnings surprise of 14%.
In the past 60 days, the consensus estimate for A. O. Smith’s 2023 earnings has improved 5%. The stock has risen 35% in the past year.
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Illinois Tool Works Inc. (ITW) : Free Stock Analysis Report
A. O. Smith Corporation (AOS) : Free Stock Analysis Report
Flowserve Corporation (FLS) : Free Stock Analysis Report
Applied Industrial Technologies, Inc. (AIT) : Free Stock Analysis Report
