Stock (Symbol) |
Illinois Tool Works (ITW) |
Stock Price |
$94 |
Sector |
| Food & Necessities |
Data is as of |
| December 7, 2015 |
Expected to Report |
| Jan 25 – Jan 29 |
Company Description |
 Illinois Tool Works Inc. is a multinational manufacturer of a diversified range of industrial products and equipment with operations in 58 countries. The Company operates in seven segments: Transportation, Power Systems & Electronics, Industrial Packaging, Food Equipment, Construction Products, Polymers & Fluids, and All Other. Businesses in the Transportation segments produce components, fasteners, fluids and polymers, as well as truck remanufacturing and related parts and service. Businesses in Power Systems & Electronics segment produce equipment and consumables associated with specialty power conversion, metallurgy and electronics. Businesses in Industrial Packaging segment produce steel, plastic and paper products and equipment used for bundling, shipping and protecting goods in transit. Source: Thomson Financial |
Sharek’s Take |
 Illinois Tool Works (ITW) is losing the battle with the strong dollar, yet smart management is continuing to push profits higher. For 2015, profits are expected to climb 9%, but if it not for the negative currency ITW says it would have 18% growth. Savvy management is focusing on what’s profitable, such as auto parts, food equipment and construction parts. In its 2014 Annual Report ITW projects 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). Illinois Tool Works was founded more than 100 years ago and is part of Standard & Poors Dividend Aristocrats list, which is companies that have increased their dividends 25 consecutive years or more. ITW has grown its dividend each year since 1964 — this will be the 51st consecutive year of increases. The stock also holds Value Line’s top rating safety rating of 1. ITW is navigating F/X very well, but with the strong dollar it’s tough to grow profits in the double digits. I think the stock is fairly valued here at 17x earnings, but is a solid buy-and-hold investment for conservative accounts. |
One Year Chart |
 Profits were growing faster than 20% a qtr earlier in the year. Now we have to settle for single digit growth. Although management is correctly focusing on what’s working (and profitable) in the end ITW is a multinational and I feel these stocks will have trouble with the dollar going higher. |
Fair Value |
 My Fair Value on this stock right now is 16x earnings. I feel ITW is a little high. I love the company, and the stock, but in the end it’s expected to grow profits 6% on average the next four qtrs and I feel stock market investors are looking for better growth. |
Bottom Line |
 Illinois Tool Works ranks 1 in Value Line’s safety rankings and has increased its dividend for 51 consecutive years. Bold management stated it should be able to give total shareholder returns of 12% to 14% per year through 2017. But that’s a tough climb with the dollar rising. I feel ITW is selling where it should be, and offers limited appreciation potential for the next year. I don’t have the stock in the Conservative Growth Portfolio, but investors should consider buying if it dips. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio N/A |
