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Illinois Tool (ITW) to Report Q4 Earnings: What to Expect?

Zacks Equity Research

Illinois Tool Works Inc. ITW is scheduled to release fourth-quarter 2018 results on Feb 1, 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 1.92%. In the last reported quarter, the company’s earnings of $1.90 surpassed the Zacks Consensus Estimate of $1.89 by 0.53%.

In the past three months, shares of this industrial products and equipment manufacturer increased 5.8% against the industry’s decline of 1.3%.

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

Factors to Affect Q4 Results

Makers of industrial machinery are currently gaining from the favorable operating environment in the United States. In this regard, we see strengthening housing market, advancements in industrial production, healthy demand for machinery made in the country and infrastructural developments as important tailwinds.

In addition to these positives, Illinois Tool’s Enterprise Strategy, the solid product portfolio and a well-diversified business structure are proving advantageous. Also, a sound capital-allocation policy and investments for innovations are working in its favor. For 2018, the company believes that healthy demand for products in North America, pricing actions, margin expansion, lower taxes and decline in share count due to ongoing share repurchase activities will strengthen financial performance.

Alternatively, raw material cost inflation on account of tariffs and other inflationary pressures, as well as unfavorable movements in foreign currencies, remain concerns. Also, the persistence of weakness in auto builds in Europe and China, as well as in international operations of Polymers & Fluids and Specialty Products segments, might impact results.

For fourth-quarter 2018, Illinois Tool anticipates earnings per share of $1.78-$1.88, reflecting year-over-year growth of 8%. Organic sales are predicted to grow 1-2%.

The Food Equipment segment in the quarter might benefit from strengthening demand from institutions. The Zacks Consensus Estimate for the segment’s revenues stands at $563 million for the fourth quarter, roughly 2.7% above revenues generated in the year-ago quarter.

The Construction Products segment might gain from demand in the residential market. The segment’s Zacks Consensus Estimate for revenues stands at $414 million, roughly 0.5% above revenues generated in the year-ago quarter. In addition, healthy growth in domestic and international business might benefit the Welding segment. The segment’s Zacks Consensus Estimate for revenues is pegged at $411 million, up 5.9% from revenues generated in the year-ago 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 -0.38%. The Zacks Consensus Estimate for the quarter is at $1.82.

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 other companies in the Zacks Industrial Products sector 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.

HD Supply Holdings, Inc. HDS has an Earnings ESP of +1.50% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Terex Corporation TEX has an Earnings ESP of +3.17% and a Zacks Rank #3.

Nordson Corporation NDSN has an Earnings ESP of +4.82% and a Zacks Rank #3.

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