What's in the Offing for Illinois Tool (ITW) in Q2 Earnings?
Illinois Tool Works Inc. ITW is scheduled to release second-quarter results on Aug 1, before market open.
The company has an impressive earnings surprise history, having outperformed the Zacks Consensus Estimate in three of the preceding four quarters, while missing in one. The average beat was 2.1%.
Let’s see how things have shaped up for Illinois Tool this earnings season.
Illinois Tool Works Inc. Price and EPS Surprise
Illinois Tool Works Inc. price-eps-surprise | Illinois Tool Works Inc. Quote
Factors to Note
Strong demand across businesses is likely to have driven Illinois Tool’s second-quarter performance.
Strong organic growth in North America and Europe is likely to have aided the Automotive OEM (Original Equipment Manufacturer) segment. We expect the segment’s revenues to increase 3.1% from the year-ago reported figure. Our estimate for the segment’s operating income reflects a 34.4% jump from the year-ago reported figure.
The Food Equipment unit is likely to have benefited from growth across both North America and International operations and strength in institutional end markets. We expect the segment’s revenues to increase 2.4% from the year-ago reported figure. Our estimate for the segment’s operating income indicates a 12% increase from the year-ago reported figure.
Strength in the capital equipment business is expected to have boosted Test & Measurement and Electronics segment revenues. Our estimate for segmental revenues indicates a 2.8% increase from the year-ago reported figure. The same for segmental operating income suggests a 16% rise from the year-ago reported figure.
Solid industrial and oil and gas businesses is likely to have buoyed the Welding segment’s performance in the to-be-reported quarter. Our estimate for segmental revenues indicates a 2.8% increase from the year-ago reported figure. The same for segmental operating income suggests a 2% rise from the year-ago reported figure.
However, reduced demand in the appliance components division is likely to have hurt the Specialty products segment in the second quarter. We expect the segment’s revenues and operating income to remain flat compared with second-quarter 2022 reported figures.
Given Illinois Tool’s substantial international presence, adverse foreign currency movements might have dented its top line in the to-be-reported quarter. We expect the company’s total revenues to increase 2.4% from the year-ago reported figure. Our estimate for the company’s earnings indicates an approximate 1% rise from the year-ago reported figure. The conservative expectation is due to softer end markets, thanks to a slowdown in the manufacturing sector.
Earnings Whispers
Our proven model predicts an earnings beat for Illinois Tool this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is the case here, as elaborated below.
Earnings ESP: Illinois Tool has an Earnings ESP of +0.54% as the Most Accurate Estimate is pegged at $2.40, higher than the Zacks Consensus Estimate of $2.39. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Illinois Tool currently carries a Zacks Rank #3.
Highlights of Q1 Earnings
Illinois Tool reported first-quarter 2023 earnings of $2.33 per share, which surpassed the Zacks Consensus Estimate of $2.18. Earnings increased 10.4% year over year. Total revenues of $4,019 million outperformed the Zacks Consensus Estimate of $3,962.4 million. The top-line results benefited from a 5% increase in organic sales. Foreign currency headwinds and divestitures had an adverse impact of 3%.
Other Stocks to Consider
Here are some other companies within the broader Industrial Products sector, which according to our model, have the right combination of elements to beat on earnings in this reporting cycle.
Emerson Electric Co. EMR has an Earnings ESP of +2.35% and a Zacks Rank #2. The company is scheduled to release third-quarter fiscal 2023 (ended Jun 30, 2023) results on Aug 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Emerson pulled off a trailing four-quarter earnings surprise of 4.5%, on average. The stock has gained 5.5% in the past three months.
Allegion plc ALLE has an Earnings ESP of +3.94% and a Zacks Rank #3. The company is slated to release second-quarter 2023 results on Jul 26.
Allegion delivered a trailing four-quarter earnings surprise of 12.5%, on average. The stock has rallied 17.7% in the past three months.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Illinois Tool Works Inc. (ITW) : Free Stock Analysis Report
Emerson Electric Co. (EMR) : Free Stock Analysis Report
Allegion PLC (ALLE) : Free Stock Analysis Report
