Illinois Tool Works Inc. (ITW) receives Medicare prescription drug subsidies for retiree prescription drug coverage. However, based on the Patient Protection and Affordable Health Care program, those subsidies will now be taxable. Thus, Illinois Tool expects a tax adjustment of approximately $22 million in the first quarter of fiscal 2010. 

The above adjustment would decrease the EPS by 4 cents. Hence, the company has revised its guidance for the first quarter and expects it to lie between $0.48 and $0.56 against the previously announced guidance of $0.52 to $0.60. Accordingly, full year fiscal 2010 guidance is also expected to fall in the range of $2.39 to $2.89 down from the previously announced guidance of $2.43 to $2.93.
 
However, Illinois Tool reiterated its total revenue growth for both first quarter and full year fiscal 2010. The first quarter forecast assumes a total revenue growth range of 14% to 18% and full-year forecast assumes a total revenue growth range of 10% to 14%. The company believes most end-markets have stabilized and anticipates modest expansion in a variety of end-markets in 2010, worldwide. 

Illinois Tool’s growth stems from its ability to develop new and improved products, as well as broadening the application of established products. Improvising and developing new methods, processes and equipment, along with acquisitions, give the company a big push.
 
New products are designed to be more cost-effective by eliminating steps in manufacturing processes, reducing the number of parts in an assembly, or by improving the quality of customers’ assembled products. We maintain our Neutral recommendation on the stock.
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