Stock (Symbol) |
Illinois Tool Works (ITW) |
Stock Price |
$130 |
Sector |
| Food & Necessities |
Data is as of |
| February 16, 2017 |
Expected to Report |
| Apr 18 – 24 |
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) has been a stellar stock during the past year — rising from around $95 to $130. And now the Trump Effect could push up manufacturing, which would be great for ITW’s business. Illinois Tool Works is a diversified industrial manufacturer that makes all sorts of stuff from baking ovens to car parts. A while back management instituted a program to focus 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 has been a success as profit margins expanded. In 2016 profits climbed 10% on just a 1% rise in sales. The company currently 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 9% a year in addition to a 2% yield. Management also buys back around $2 billion in stock per year. This is a great buy-and-hold stock for conservative investors, but the only problem is the P/E of 21 is higher than the median P/E in any of the past ten years. I continue to have ITW on my radar for the Conservative Portfolio. |
One Year Chart |
 Last qtr ITW grew profits 13% and beat the street by a penny on 4% sales growth. Foreign currency translation reduced revenue by 2%. This news was anti-climactic as 2017 estimates stayed fairly in-line with last qtr. Qtrly Profit Estimates are 12%, 9%, 8% and 9%. This continues to be a 9% grower, and the Est. LTG is 9%. 2018’s estimates did jump from $6.62 to $6.83 since last qtr (Trump Effect) but that’s a ways away. This stock has really soared during the last year, and now has a P/E of 21. |
Fair Value |
 I’m moving my Fair Value up from 19x earnings to 20x. Still, the stock sells for 21x earnings which is higher than the median P/E in any of the previous ten years. Thus I feel ITW could be around this price for the next year, but I haven’t been good at calling this stock during the last year so there’s little reason to believe me now. With 2018’s numbers up from last qtr I do estimate a 11% total return through next year, but that’s just a guestimate. |
Bottom Line |
 Illinois Tool Works is a great stock for conservative accounts and carries a 9% Est LTG in addition to a 2% dividend that’s increased every year since 1964. Yes the Trump Effect has taken up 2018 estimates, but right now I see business as usual for this industrial manufacturer. Illinois Tool Works in on the radar for the Conservative Portfolio, but from the nice action in the stock it doesn’t look like it will be cooling down anytime soon. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio N/A |
