EmailIllinois Tool Works (ITW 136.93, -9.93, -6.76%) is trading lower after the company
reported in-line second quarter earnings while lowering earnings guidance for
the year. ITW is an industrial manufacturing company that operates in seven segments:
Automotive OEM; Food Equipment; Test & Measurement and Electronics;
Welding; Polymers & Fluids; Construction Products; and Specialty Products.
"ITW delivered another strong quarter with good growth
momentum and excellent operational execution," said E. Scott Santi, the company’s
Chairman and CEO. "The company's ability to overcome near-term
inflationary and currency challenges and generate four percent organic revenue
growth, core operating earnings growth of nine percent, core EPS growth of 19
percent, and continue to expand margins is a direct result of the strength and
resilience of the ITW Business Model and the dedicated team of ITW
professionals around the world who leverage it to serve our customers and
execute our strategy with excellence each and every day."
Second quarter revenue was up 7% with 4% organic growth. All
seven of the company's business segments delivered positive year on year
organic revenue growth, led by Welding, which saw organic growth of 13%. Overall
organic growth of 4% was driven by 5% growth in North America.
However, ITW lowered fiscal 2018 EPS guidance to $7.50-7.70
from $7.60-7.80 because second half earnings per share are projected to have a
$0.12 negative currency impact versus prior guidance.
The company also revised its outlook for operating margin to
24-25% from 25.0-25.5%, reflecting price/cost related margin dilution. The
company continues to expect to recover the impact of raw material cost
increases through price actions on a dollar for dollar basis for the full year
and as a result expects the full year price/cost impact on the company's
earnings per share to be neutral (as it was in the first half of 2018). The
company continues to expect organic growth of 3-4% and free cash flow at or
above 100% of net income.
ITW also guided third quarter EPS towards the low end of
expectations.
At $138/share (indicated down 6% pre-market), ITW has a $47
bln market value and trades at ~18x EPS, roughly in-line with large cap
industrial peers.
than one year.
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