Stock (Symbol) |
Illinois Tool Works (ITW) |
Stock Price |
$140 |
Sector |
| Food & Necessities |
Data is as of |
| May 28, 2017 |
Expected to Report |
| Jul 18 |
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. Source: Thomson Financial |
Sharek’s Take |
 Illinois Tool Works (ITW) posted an impressive 19% rise in profits last qtr as companies around the world invested to grow their businesses. Business investment means companies are spending to grow. This was clearly the case in Europe as sales there rose 6% last qtr. Illinois Tool Works is a diversified industrial manufacturer that makes all sorts of stuff from baking ovens to car parts. In 2012 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 roaring success as profit margins expanded from 16% to 23% through 2016. ITW did $14.1 billion in sales last year through 7 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 bought back $2 billion in stock in 2016. This is a great buy-and-hold stock for conservative investors, but the only issue is the P/E of 22 is high. But 2017 profit estimates just rose, so the outlook is bright, thus I will add ITW to the Conservative Portfolio. Note: these charts were done 5/28 when ITW was $140. Today, 6/1, I will be buying in at $143. |
One Year Chart |
 Last qtr ITW grew profits 19% which blew past the 12% estimate. Sales growth accelerated from 4% to 6%. Qtrly Profit Estimates are 12%, 9%, 11% and 8%. Estimates increased across the board — 2017’s went from $6.18 to $6.35. Still, the stock is high as the Est. LTG is 9% vs. a P/E of 22. |
Fair Value |
 I’m moving my Fair Value up from 20x earnings to 22x as the company beat the street, posted strong profit growth, and upped guidance. That combination should keep the stock trending higher. |
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 stock is high but with the global economy picking up steam, the company could be beat estimates in the coming qtrs. ITW will be added to the Conservative Portfolio, where it will rank 25th in the 34 stock Power Rankings. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio 25 of 34 |
