Yahoo Finance Illinois Tool (ITW) Beats on Q1 Earnings, Raises FY23 View
Illinois Tool Works Inc. ITW reported first-quarter 2023 earnings of $2.33 per share, which surpassed the Zacks Consensus Estimate of $2.18. Our estimate for first-quarter earnings was $2.16. Earnings increased 10.4% year over year.
Illinois Tool’s revenues of $4,019 million outperformed the Zacks Consensus Estimate of $3,962.4 million. Our estimate for net sales in the reported quarter was $3,950.2 million. The top-line results benefited from a 5% increase in organic sales. Foreign currency headwinds and divestitures had an adverse impact of 3%.
Segmental Performance
Test & Measurement and Electronics’ revenues inched up 2.6% year over year to $703 million. Our estimate for segmental revenues was $694.1 million. Revenues from Automotive OEM (Original Equipment Manufacturer) increased 4.7% to $796 million. Our estimate for segmental revenues was $754.4 million. Food Equipment generated revenues of $635 million, increasing 12.3% year over year. Our estimate for segmental revenues was $568.1 million.
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Welding revenues were $493 million, growing 9.6% year over year. Our estimate for segmental revenues was $450.8 million. Construction Products’ revenues were down 4.6% to $526 million. Our estimate for segmental revenues was $554.2 million.
Revenues of $423 million from Specialty Products reflected a decrease of 6.4%. Our estimate for segmental revenues was $452.1 million. Polymers & Fluids’ revenues of $447 million declined 7% year over year. Our estimate for segmental revenues was $482.6 million.
Margin Profile
In the reported quarter, Illinois Tool’s cost of sales dipped approximately 1% year over year to $2,341 million. Selling, administrative, and research and development expenses increased 3.5% to $675 million.
The operating margin was 24.2% in the quarter, up 150 basis points (bps) year over year. Enterprise initiatives contributed 100 bps to the operating margin.
Balance Sheet and Cash Flow
At the end of the first quarter, Illinois Tool had cash and equivalents of $1,143 million compared with $708 million at the end of December 2022. Long-term debt was $5,510 million compared with $6,173 million at the end of December 2022.
In the first quarter, Illinois Tool generated net cash of $728 million from operating activities, reflecting a surge of more than 100% from the year-ago reported number. Capital spending on the purchase of plant and equipment was $113 million, up 52.7% year over year. Free cash flow of $615 million surged more than 100% year over year.
2023 Guidance Raised
For 2023, Illinois Tool raised its earnings guidance to $9.45-$9.85 per share compared with $9.40-$9.80 anticipated earlier. The mid-point of the guided range — $9.65 — lies above the Zacks Consensus Estimate of $9.50.
Amid a slowdown in certain end markets, ITW expects muted organic growth of 3-5%. Foreign currency headwinds and divestitures are expected to reduce revenues by 1%. With this, total revenues are expected to increase 2-4% year over year in the current year. Previously, the company expected total revenues to increase 1.5-3.5%.
Illinois Tool anticipates operating margin of 24.5-25.5%, with a contribution of approximately 100 bps from enterprise initiatives. Free cash flow is expected to be more than 100% of net income. The company expects to buyback approximately $1.5 billion worth of shares.
Zacks Rank & Key Picks
Illinois Tool currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks within the broader Industrial Products sector are as follows:
Ingersoll Rand IR presently sports a Zacks Rank #1 (Strong Buy). The company pulled off a trailing four-quarter earnings surprise of 8.5%, on average. You can see the complete list of today’s Zacks #1 Rank stocks.
Ingersoll Rand has an estimated earnings growth rate of 7.6% for the current year. The stock has rallied 16.5% in the past six months.
Allegion ALLE presently carries a Zacks Rank #2 (Buy). The company delivered a trailing four-quarter earnings surprise of 12.5%, on average.
Allegion has an estimated earnings growth rate of 15.1% for the current year. The stock has gained 8.5% in the past six months.
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Illinois Tool Works Inc. (ITW) : Free Stock Analysis Report
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