Notable Earnings: Illinois Tool Works Inc. (NYSE:ITW)

Illinois Tool Works Inc. (NYSE:ITW) reported earnings for the three months ended Mar2016 on April 20, 2016. The company earned $1.29 per share on revenue of $3.27B. Analysts had been modeling earning per share of $1.26 with $3.25B in revenue.

Illinois Tool Works Inc. (ITW) on April 20, 2016 reported first quarter 2016 diluted earnings per share (EPS) of $1.29, a 7 percent increase compared to the year-ago period. Operating margin increased 120 basis points to 22.1 percent and organic revenue increased 1 percent.  The company’s ongoing Product Line Simplification (PLS) activities reduced organic revenue growth by 1 percentage-point.

“We are pleased with ITW’s strong start to 2016,” said E. Scott Santi, Chairman and Chief Executive Officer. “In a challenging environment, the company continued to deliver meaningful improvement in all of our key performance metrics: organic growth, EPS, operating margin, return on invested capital, and free cash flow.  Consistent with our strategy, we continue to execute the steps necessary to position the company to deliver solid above-market organic growth with best-in-class margins and returns.  In the current economic environment and over the long-term, ITW’s unique business model and our proven track record of operational execution position us very well for continued differentiated performance.”

First Quarter Highlights

• GAAP EPS increased 7 percent to $1.29.  Excluding $(0.04) impact from foreign currency translation, EPS would have been up 10 percent.


• Operating margin increased 120 basis points to a first quarter record of 22.1 percent as Enterprise Initiatives contributed 130 basis points.


• Organic revenue grew 1 percent as North America grew 2 percent and International declined 1 percent.  Consumer-facing businesses grew 3 percent and Industrial-facing businesses declined 3 percent.  Total revenue was $3.3 billion, a decline of 2 percent due to the impact of foreign currency.


• After-tax return on invested capital improved 180 basis points to a first quarter record of 21.2 percent.


• Free cash flow conversion was 90 percent.


• Five of seven segments achieved positive organic revenue growth as Construction Products grew 5 percent, Automotive OEM, Food Equipment, and Specialty Products all grew 3 percent, and Polymers and Fluids 1 percent.  Welding and Test & Measurement Electronics declined by 9 and 2 percent, respectively.


• Six of seven segments increased operating margin with Automotive OEM up 140 basis points to 26.4 percent, Food Equipment up 190 basis points to 24.5 percent, Test & Measurement Electronics up 80 basis points to 15.5 percent, Polymers & Fluids up 20 basis points to 20.2 percent, Construction Products up 440 basis points to 21.0 percent, and Specialty Products up 350 basis points to 26.1 percent. Welding declined 300 basis points to 23.9 percent.

Illinois Tool Works Inc. earnings per share showed an increasing trend of 9.8% for the current fiscal year. The company’s expected EPS growth rate for next fiscal year is 604%.Analysts project EPS growth over the next 5 years at 8.65%. It has EPS annual growth over the past 5 fiscal years of 12.2% when sales declined -2.8. It reported -2% sales drop, and 6.5% EPS growth in the last quarter.

The stock is trading at $106.03, up 37.02% from 52-week low of $78.79. The stock trades down -0.15% from its peak of $106.19 and 4.24% above the consensus price target of $110.53. Its volume clocked up at 2.03 million shares which is higher than the average volume of 1.43 million shares. Its market capitalization currently stands at $37.86B.