As you might know, Illinois Tool Works Inc. (NYSE:ITW) just kicked off its latest third-quarter results with some very strong numbers. It was a solid earnings report, with revenues and statutory earnings per share (EPS) both coming in strong. Revenues were 12% higher than the analysts had forecast, at US$3.3b, while EPS were US$1.83 beating analyst models by 25%. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Taking into account the latest results, the current consensus from Illinois Tool Works' 18 analysts is for revenues of US$13.2b in 2021, which would reflect a reasonable 5.0% increase on its sales over the past 12 months. Statutory earnings per share are predicted to increase 9.2% to US$7.24. In the lead-up to this report, the analysts had been modelling revenues of US$13.1b and earnings per share (EPS) of US$7.14 in 2021. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
The analysts reconfirmed their price target of US$192, showing that the business is executing well and in line with expectations. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Illinois Tool Works at US$220 per share, while the most bearish prices it at US$147. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Illinois Tool Works shareholders.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. The analysts are definitely expecting Illinois Tool Works' growth to accelerate, with the forecast 5.0% growth ranking favourably alongside historical growth of 0.3% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to see revenue growth of 7.4% next year. It seems obvious that, while the future growth outlook is brighter than the recent past, Illinois Tool Works is expected to grow slower than the wider industry.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Illinois Tool Works' revenues are expected to perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that in mind, we wouldn't be too quick to come to a conclusion on Illinois Tool Works. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Illinois Tool Works analysts - going out to 2024, and you can see them free on our platform here.
We don't want to rain on the parade too much, but we did also find 1 warning sign for Illinois Tool Works that you need to be mindful of.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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