Illinois Tool Works Inc. (ITW), on February 4, received a favorable judgment from the Federal Court of Australia in relation to tax a dispute case with the Australian Taxation Office.
The dispute was over income tax deductions in connection with an intercompany financing transaction. The company will be granted significant allowable tax deduction in the first quarter of 2011. Both parties are required to submit orders by February 18, 2011, according to the court rulings.
Illinois Tool engages in the manufacturing of diversified range of industrial products and equipment. The company primarily operates in Industrial Packaging, Power Systems & Electronics, Transportation, Food Equipment, Construction Products, Polymers & Fluids, Decorative Surfaces and Other end markets.
Despite posting somewhat disappointing fourth quarter results that fell a cent short of the Zacks Consensus Estimate, we believe Illinois Tool stands well positioned to grow in the quarters ahead as evident from the company’s promising EPS guidance of $3.60-$3.84, with mid-point up 23% year over year and the revenue growth expectation of 11.5%-14.5%.
It is anticipated that near-term results would be largely influenced by the strengthening end markets, restructuring benefits and share buybacks, offset partially by incremental international sales carrying lower margins compared with domestic sales. Over the medium to long term, prime driving catalysts will include a strong acquisition pipeline and recovery in economic conditions.
However, immense competitive pressure, especially from Cooper Industries plc (CBE), General Electric Co. (GE), and Manitowoc Co. Inc. (MTW), and huge exposure to foreign currency puts the company in an unfavorable position.
We currently maintain a Neutral recommendation on the stock.
COOPER INDS PLC (CBE): Free Stock Analysis Report
GENL ELECTRIC (GE): Free Stock Analysis Report
ILL TOOL WORKS (ITW): Free Stock Analysis Report
MANITOWOC INC (MTW): Free Stock Analysis Report
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