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Illinois Tool (ITW) to Post Q1 Earnings: What's in Store?

Zacks Equity Research

Illinois Tool Works Inc. ITW is scheduled to release first-quarter 2019 results on Apr 25, before the market opens.

The company delivered better-than-expected results in three of the last four quarters while lagged estimates once. Average earnings surprise was a positive 0.82%. In the last reported quarter, its earnings of $1.83 surpassed the Zacks Consensus Estimate of $1.82 by 0.55%.

In the past three months, shares of this industrial products and equipment manufacturer have increased 20.1%, roughly in line with the industry’s growth of 19.4%.

Let us see how things are shaping up for Illinois Tool this quarter.

Factors to Affect Q1 Results

We believe that makers of industrial machinery are currently reaping benefits of use of sophisticated technologies in manufacturing process and growing use of e-retailing. Also, new construction and remodeling activities, infrastructure investments, and favorable policy changes in the United States are proving beneficial.

Notably, increasing industrial production represents favorable operating environment for industrial machinery makers, but a decelerating rate of growth recorded in the past few months is concerning. To add, global uncertainties and trade tension between the United States and China have dimmed growth prospects of the global economy.

Apart from these broader factors, Illinois Tool’s results can be influenced by a number of company-specific matters. Of all, the company’s Enterprise Strategy — including Business Structure Simplification, Portfolio Management and Strategic Sourcing initiatives — as well as its well-diversified business structure, a solid product portfolio and share buyback activities will be boons. However, results in the to-be-reported quarter are predicted to be adversely impacted by forex woes (roughly 7 cents per share), charges related to restructuring activities (7 cents) and higher tax expenses (5 cents).

For first-quarter 2019, Illinois Tool’s earnings are expected to be $1.73-$1.83 per share. Organic sales are predicted to be flat year over year. The projections include impacts of anticipated challenges in the quarter as well as adverse impacts of one less shipping day in the quarter.

The Food Equipment segment might benefit from strengthening demand from institutional end markets in the quarter. The Zacks Consensus Estimate for the segment’s revenues stands at $538 million for the first quarter, suggesting roughly 2.1% rise in revenues from the figure generated in the year-ago quarter. The segment’s average sales surprise for the last four quarters was a positive 0.37%.

In addition, the Welding segment might gain from healthy growth in domestic and international businesses. The segment’s Zacks Consensus Estimate for revenues is pegged at $435 million, up 2.8% from revenues generated in the year-ago quarter. The segment’s average sales surprise for the last four quarters was a positive 1.53%.

The Test & Measurement segment might be hurt from weak business expected in the semiconductor manufacturing end market. Also, the Automotive OEM segment’s results might be influenced by the company’s efforts to restructure business in Europe. The Zacks Consensus Estimate for revenues is pegged at $832 million, indicating a decline of 7.7% from the year-ago quarter figure. Also, the segment’s operating income estimates for the quarter reflects a decline of 17.1% from the year-earlier quarter.

Earnings Whispers

Our proven model provides some idea about the stocks that are about to release their earnings results. Per the model, a stock needs a combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for a likely earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The case with Illinois Tool has been provided below.

Earnings ESP: Illinois Tool has an Earnings ESP of -0.02%. The Zacks Consensus Estimate for the quarter is at $1.80.

Illinois Tool Works Inc. Price, Consensus and EPS Surprise


Illinois Tool Works Inc. Price, Consensus and EPS Surprise | Illinois Tool Works Inc. Quote

Zacks Rank: The company currently carries a Zacks Rank #3.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Stocks to Consider

Here are some companies in the industry that you may want to consider as they have the right combination of elements to post an earnings beat this quarter, according to our model.

Sun Hydraulics Corporation SNHY has an Earnings ESP of +1.05% and a Zacks Rank #1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Colfax Corporation CFX has an Earnings ESP of +0.91% and a Zacks Rank #3.

HD Supply Holdings, Inc. HDS has an Earnings ESP of +1.43% and a Zacks Rank #3.

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