Stock (Symbol) |
Illinois Tool Works (ITW) |
Stock Price |
$124 |
Sector |
| Food & Necessities |
Data is as of |
| November 21, 2016 |
Expected to Report |
| Jan 25 – 30 |
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 |
 Industrial manufacturer Illinois Tool Works (ITW) has been trending up all year, but the recent Trump Presidency could provide boost manufacturing as well as the economy, and that would help boost business. As it stands now, ITW is expected to grow profits 10% for the 2nd consecutive year with almost no help from the market environment. Management has a long-term program which focuses the company on what’s profitable, such as auto parts, food equipment and construction parts. So it sold off divisions of the business that it couldn’t raise prices or profit margins in. This proving to be a success as profit margins are improving — that’s a big reason for the stock’s surge. ITW has seven business segments:
Illinois Tool Works was founded more than 100 years ago, gets a top rating for safety, and has grown its dividend each year since 1964. It has an Est. LTG of 8% a year in addition to a 2% dividend. Additionally, ITW is expected to spend $2 billion on stock repurchases this year and recently raised its dividend 18%. My issue is the stock sells for 20x earnings, which historically is at the high-end of its range. I am looking to add ITW to conservative accounts, but am waiting for the stock to come down a bit first. |
One Year Chart |
 Last qtr ITW grew sales 4% but profits increased 8% due to better profit margins and stock buybacks. The company beat the street by a penny, and profit estimates remained consistent with last qtr. Profit Estimates for the next 4 qtrs are 12%, 12%, 9% and 7%. This stock has surged this year — to my surprise. |
Fair Value |
 My Fair Value for 2017 is 19x earnings which is $116 a share. The stock is $124 and my 2018 Fair Value is $128. But I’ve been wrong on ITW all year, and it could prove me wrong once again. It seems the market environment could improve with Trump in office, but earnings estimates didn’t increase this qtr so we’ll see. |
Bottom Line |
 Illinois Tool Works is a great stock for conservative accounts and carries a 8% Est LTG in addition to a 2% yield. The dividend has increased every year since 1964 which is remarkable for an industrial manufacturer. I like this stock a lot and feel business conditions could improve in the coming year, but the stock has had quite a run this year thus I am on the sidelines for now. I will look to add ITW to the Conservative Portfolio on a dip. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio N/A |
