Since Illinois Tool Works Inc. (NYSE:ITW) released its earnings in September 2018, the consensus outlook from analysts appear fairly confident, with profits predicted to increase by 39% next year compared with the past 5-year average growth rate of 1.6%. With trailing-twelve-month net income at current levels of US$1.7b, we should see this rise to US$2.3b in 2020. Below is a brief commentary around Illinois Tool Works’s earnings outlook going forward, which may give you a sense of market sentiment for the company. Investors wanting to learn more about other aspects of the company should research its fundamentals here.
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How will Illinois Tool Works perform in the near future?
Over the next three years, it seems the consensus view of the 20 analysts covering ITW is skewed towards the positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To reduce the year-on-year volatility of analyst earnings forecast, I’ve inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.
This results in an annual growth rate of 4.0% based on the most recent earnings level of US$1.7b to the final forecast of US$2.5b by 2022. EPS reaches $9.15 in the final year of forecast compared to the current $4.9 EPS today. In 2022, ITW’s profit margin will have expanded from 12% to 17%.
Future outlook is only one aspect when you’re building an investment case for a stock. For Illinois Tool Works, there are three fundamental factors you should further research:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is Illinois Tool Works worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Illinois Tool Works is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Illinois Tool Works? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.