Illinois Tool Works Inc. (ITW) is slated to release its third quarter 2010 results on Tuesday, October 19. The current Zacks Consensus Estimate for the third quarter earnings per share (EPS) is 82 cents, representing an annualized growth of 22.46%.
With respect to earnings surprises, over the trailing four quarters, Illinois Tool outperformed the Zacks Consensus Estimate in two quarters, lagged behind in one, and was in line with the other quarter. The average earnings surprise was a positive 5.37%, implying that the company has outdone the Zacks Consensus Estimate by the same magnitude over the last four quarters.
Second Quarter Highlights
Illinois Tool’s second quarter earnings per share from continuing operations were up 131% year over year to 83 cents compared with 36 cents in the comparable quarter of 2009. The increase in earnings was primarily due to the growth in revenue, which more than offset the increases in tax rate and operating expense.
EPS in the quarter was in line with the Zacks Consensus Estimate of 83 cents and at the mid-point of the company’s guidance range of 80–86 cents, with results brought down by 3 cents due to higher taxes.
Operating revenue soared 20.1% to $4,076.3 million, compared with $3,392.9 million in the second quarter of 2009, attributable to continued improvement in end market demand. The increase was at the high end of the company’s projected growth range of 18%–20%.
Detailed discussion on the second quarter results can be found here: ITW In Line with Zacks Estimate
Agreement of Estimate Revisions
In the last 30 days, out of the 15 analysts providing estimates, 5 upped their earnings per share (EPS) estimate for 2010. While out of the 23 analysts, three increased their estimates for 2011.
For the third quarter of 2010, there are 5 (out of 20 analysts) positive EPS estimate revisions in the last 30 days and two for the fourth quarter.
The positive revisions incorporates the company’s growth prospects in its reviving end markets including Transportation, Industrial Packaging, Power Systems and Electronics, Construction Products, and Polymers and Fluids.
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Agreement – Estimate Revisions |
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|
Current Qtr |
Next Qtr |
Current Year |
Next Year |
|
|
Up Last 7 Days |
1 |
0 |
1 |
0 |
|
|
Up Last 30 Days |
5 |
2 |
5 |
3 |
|
|
Down Last 7 Days |
0 |
0 |
0 |
0 |
|
|
Down Last 30 Days |
0 |
0 |
0 |
0 |
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Magnitude of Estimate Revisions
Estimates over the last 30 days have gone up by just one cent from $3.05 to $3.06 for 2010, representing a 39.63% year over year growth. For 2011, estimates moved up by 2 cents to $3.62 from $3.60, representing a year over year growth of 18.26%.
Estimates for the third and the fourth quarters inched up by one cent each to 82 cents and 79 cents, respectively. These reflected a year-over-year growth of 22.46% for the third quarter and 27.33% for the fourth quarter.
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Magnitude – Consensus Estimate Trend |
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|
Current Quarter |
Next Quarter |
Current Year |
Next Year |
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|
Current |
0.82 |
0.79 |
3.06 |
3.62 |
|
|
7 Days Ago |
0.82 |
0.79 |
3.05 |
3.62 |
|
|
30 Days Ago |
0.81 |
0.78 |
3.05 |
3.60 |
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|
60 Days Ago |
0.81 |
0.79 |
3.05 |
3.61 |
|
|
90 Days Ago |
0.80 |
0.80 |
3.04 |
3.62 |
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Our Take
Illinois Tool Works expects its third quarter 2010 EPS from continuing operations guidance to fall within the 72–84 cent range. Revenue growth is likely to be in the 9%–13% range. For full-year 2010, the company hopes EPS to be within the $2.82–$3.08 range based on the revenue growth expectations of 11%–13%.
Taking into consideration the August-end revenue growth, we believe the company is well positioned to benefit from its reviving end markets and post results roughly at the high-end of the management’s guidance range. Particular strength can be seen in automotive OEM, industrial packaging, welding, electronics and polymers and fluids businesses.
Illinois Tool Works, operating through 800 business units in 57 countries, is one of the leading manufacturers of industrial products and equipment. The company faces stiff competitions from its peers including Cooper Industries plc (CBE), General Electric Co. (GE), and Manitowoc Co. Inc. (MTW).
We currently maintain our Neutral recommendation on the stock, which is in line with the Zacks Rank of #3 (Hold).
ILL TOOL WORKS (ITW): Free Stock Analysis Report
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