Stock (Symbol) |
Illinois Tool Works (ITW) |
Stock Price |
$90 |
Sector |
| Food & Necessities |
Data is as of |
| February 11, 2016 |
Expected to Report |
| Apr 19 – Apr 25 |
Company Description |
 Illinois Tool Works Inc. (ITW) is a manufacturer of a range of industrial products and equipment. The Company’s operates in seven segments: Automotive OEM, Test & Measurement and Electronics, Food Equipment, Polymers & Fluids, Welding, Construction Products and Specialty Products. These operations serve end markets as automotive original equipment manufacturers/tiers, automotive aftermarket, general industrial, commercial food equipment and construction. It produces components and fasteners for automotive-related applications; equipment, consumables and related software; commercial food equipment, adhesives, sealants, lubrication and cutting fluids; arc welding equipment, consumables and accessories; construction fastening systems and truss products, and beverage packaging equipment and consumables. The Company operates approximately 90 divisions in 57 countries. Source: Thomson Financial |
Sharek’s Take |
 Illinois Tool Works (ITW) is doing the best it can with the dollar being strong. Savvy management has embarked on a long-term program which focuses the company on what’s profitable, such as auto parts, food equipment and construction parts. The plan is working as profit margins are improving, but like many multinationals, ITW has to deal with a strong dollar. Illinois Tool Works was founded more than 100 years ago, holds Value Line’s top rating safety rating of 1, and has grown its dividend each year since 1964. Analysts give ITW an expected long-term growth rate of 8% per year, which including the yield of 2% would be an estimated total return of 10% a year. In its 2014 Annual Report ITW projected total annual returns of 12% to 14% per year through 2017 (9-10% increases in profits, 1-2% in share repurchases or acquisitions, and a 2% dividend). But management expects around just 6% profit growth for 2016 as the strong dollar is making things tough. I continue to think the stock is fairly valued here at 17x earnings, but is a great one to invest in when profit growth returns to the double digits. |
One Year Chart |
 Last qtr, ITW’s sales fell 7% but profits rose 4% as the company improved profit margins and bought back stock. In 2015, profits rose 10%, but management said if it weren’t for the negative currency it would have had 18% growth. Looking at the one-year chart, the stock has support around $80 if you’re thinking about investing. With Estimates showing just 4% and 6% profit growth expected the next 2 qtrs I don’t think the stock has enough momentum to break past $95 and run higher. |
Fair Value |
 My Fair Value on ITW is $88 for 2016, which is around where the stock’s selling now. Also, 2016 profit estimates have declined a bit in three of the last four qtrs. |
Bottom Line |
 Illinois Tool Works is a solid investment for conservative accounts such as trusts and IRAs. The two negatives are ITW is dependant on a good economy and the company is currently fighting foreign exchange rates which are hampering profits. The stock isn’t currently in the Conservative Growth Portfolio as profit growth is merely in the mid-single digits at this time. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio N/A |
