Stock (Symbol) |
Illinois Tool Works (ITW) |
Stock Price |
$142 |
Sector |
| Food & Necessities |
Data is as of |
| August 4, 2017 |
Expected to Report |
| Oct 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) just delivered another solid qtr, with profits up 14% on a 5% gain in sales. Profit margins rose to an all-time high of 24%. 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. Illinois Tool Works is a diversified industrial manufacturer that makes all sorts of stuff from baking ovens to car parts. Last qtr, results were solid in all ITW’s divisions. It 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. Management just raised the qtrly dividend from $0.65 to $0.78 a share. Management bought back $2 billion in stock last year as well. This is a great buy-and-hold stock for conservative investors, with an Est. LTG of 8% a year in addition to a 2% yield. Right now profits are growing in the mid-teens, and profit estimates are on the rise, so the stock is timely. 2017 estimates have increased from $6.13 to $6.18, $6.35 and $6.45 the last 4 qtrs. I envision ITW continuing on its current trend higher, but the stock isn’t undervalued, as it has a P/E of 22. |
One Year Chart |
 Last qtr ITW grew profits 14% as sales increased 6%. Analysts had estimated 12% profit growth. Currency only reduced sales by 1% and I feel the declining US dollar will benefit sales in the coming qtrs. Qtrly Profit Estimates are 9%, 14%, 10% and 8%. Estimates increased across the board for the 4th straight qtr. Still, the stock is high as the Est. LTG is 8% vs. a P/E of 22. |
Fair Value |
 My Fair Value is a rich 22x earnings. With economies growing solidly around, sales are coming in over expectations, and with mid-teens profit growth this company deserves a premium P/E due to its safety and long-term certainty. |
Bottom Line |
 Illinois Tool Works is a great stock for conservative clients. It’s a safe industrial stock with a 8% Est LTG in addition to a 2% dividend that’s increased every year since 1964. I feel this stock is fairly valued right now, but with momentum strong if you don’t own the stock it might leave you behind as profit estimates have been rising. ITW ranks 24th in the Conservative Portfolio Power Rankings. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio 24 of 32 |
