Illinois Tool (ITW) Gains From Business Strength Amid Risks
Illinois Tool Works Inc. ITW has been gaining from strength across its Automotive Original Equipment Manufacturer and Food Equipment segments, which have helped offset the softness in the Test & Measurement and Electronics and Specialty Products segments. A decline in costs, as well as easing supply chains, have aided margins. Also, solid momentum in institutional, food retail and restaurant end markets has been boosting the performance of the Food Equipment segment.
The company’s enterprise initiatives and cost management actions have been supporting its margin performance. In the first nine months of 2023, its operating margin increased 180 basis points to 25.2%, supported by enterprise initiatives’ contribution of 140 basis points. ITW anticipates the operating margin to be 25-25.5% for 2023.
Illinois Tool continues to increase shareholders’ value through dividend payments & share repurchases. In August 2023, it hiked its dividend by 7% to $1.40 per share. Also, in the third quarter of 2023, it repurchased shares worth $375 million. The company is expected to have repurchased shares worth $1.5 billion in 2023.
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In the past three months, the Zacks Rank #3 (Hold) company has gained 9.5% compared with the industry’s growth of 14.2%.
However, weakness in semiconductor-related business in the North American region has been denting revenues at Illinois Tool’s Test & Measurement and Electronics segment. The Specialty Products segment is also experiencing weakness due to a decline in the specialty films, consumer packaging, specialty films and strength films businesses.
Due to the ongoing labor strike in the automotive industry, the company narrowed its earnings guidance for 2023. It expects earnings to be $9.65-$9.85 per share for the current year compared with earnings of $9.55-$9.95 per share anticipated earlier.
3 Promising Stocks
We have highlighted three better-ranked stocks from the same space, namely Crane Company CR, Flowserve Corporation FLS and Ferguson plc FERG, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Crane delivered a trailing four-quarter average earnings surprise of 29.8%. In the past 60 days, the Zacks Consensus Estimate for CR’s 2023 earnings has remained stable. The stock has rallied 27.9% in the past three months.
Flowserve has a trailing four-quarter average earnings surprise of 27.3%. The consensus estimate for FLS’ 2023 earnings has increased 1% in the past 60 days. Shares of the company have increased 3.9% in the past three months.
Ferguson delivered a trailing four-quarter average earnings surprise of 4.7%. In the past 60 days, the consensus estimate for FERG’s 2023 earnings has improved by 0.5%. The stock has risen 12.1% in the past three months.
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Illinois Tool Works Inc. (ITW) : Free Stock Analysis Report
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