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Will ITW Deliver Upbeat Results This Quarter?

Zacks Equity Research

Illinois Tool Works Inc. (ITW), an industrial products and equipments manufacturer, is slated to report its first-quarter 2014 results before the market opens on Apr 22. The company’s 1.1% earnings surprise in fourth-quarter 2013 as well as a robust outlook for 2014 impressed its investors.

Let us see how things are shaping up for first-quarter 2014 earnings release and whether the company will be able to post another quarter of upbeat results.

Factors to Influence Q1 Results

Let us first look at the main highlights of the last-reported quarter. Earnings per share were 92 cents, marginally above the Zacks Consensus Estimate of 91 cents. Revenues increased 4.8% while operating margin expanded 260 basis points (bps), aided by a 110 bps contribution from Enterprise Strategic initiatives.

For 2014, Illinois Tool Works anticipates earnings per share to be up 18−24%, while organic revenue is expected to grow in a 2−3% range. The company anticipates spending roughly $700 million in dividend payments, $1.8 billion on share repurchases and $375 million on acquisitions. Enterprise Strategic initiatives are likely to garner results with nearly $600–$800 million in cost savings. Further, divestment of the Industrial Packaging business will be an added boon for the company.

In the past 5 years, Illinois Tool Works’ earnings grew 5.0%, while it is expected to grow 9.3% in the next 5 years.

However, adverse weather conditions in the United States in the initial months of 2014 impacted industrial activities and hence influenced demand for industrial tools.   

Earnings Whispers?

Our proven model does not conclusively show that Illinois Tool Works is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: Illinois Tool Works has an ESP of -1.02% for first-quarter 2014, which indicates the difference between the Most Accurate estimate of 97 cents and the Zacks Consensus Estimate of 98 cents.

Zacks Rank: Illinois Tool Works carries a Zacks Rank #2 (Buy), which together with a negative ESP makes surprise prediction difficult.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:  

Colfax Corp. (CFX) with Earnings ESP of +4.65% and a Zacks Rank #2.

Rockwell Automation Inc. (ROK) with Earnings ESP of +1.38% and a Zacks Rank #3 (Hold).

Manitex International, Inc. (MNTX) with Earnings ESP of +5.56% and a Zacks Rank #3.

Read the Full Research Report on ITW
Read the Full Research Report on ROK
Read the Full Research Report on MNTX
Read the Full Research Report on CFX

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