Illinois Tool Works Inc. Just Beat EPS By 16%: Here's What Analysts Think Will Happen Next

Illinois Tool Works Inc. (NYSE:ITW) shareholders are probably feeling a little disappointed, since its shares fell 2.5% to US$242 in the week after its latest quarterly results. Revenues were US$4.0b, approximately in line with expectations, although statutory earnings per share (EPS) performed substantially better. EPS of US$2.73 were also better than expected, beating analyst predictions by 16%. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

View our latest analysis for Illinois Tool Works

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Following the latest results, Illinois Tool Works' 16 analysts are now forecasting revenues of US$16.4b in 2024. This would be a reasonable 2.3% improvement in revenue compared to the last 12 months. Statutory per-share earnings are expected to be US$10.40, roughly flat on the last 12 months. In the lead-up to this report, the analysts had been modelling revenues of US$16.5b and earnings per share (EPS) of US$10.14 in 2024. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.

There's been no major changes to the consensus price target of US$253, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Illinois Tool Works at US$305 per share, while the most bearish prices it at US$212. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Illinois Tool Works shareholders.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's pretty clear that there is an expectation that Illinois Tool Works' revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 3.1% growth on an annualised basis. This is compared to a historical growth rate of 4.0% over the past five years. Compare this to the 175 other companies in this industry with analyst coverage, which are forecast to grow their revenue at 3.6% per year. Factoring in the forecast slowdown in growth, it looks like Illinois Tool Works is forecast to grow at about the same rate as the wider industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Illinois Tool Works' earnings potential next year. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Illinois Tool Works analysts - going out to 2026, and you can see them free on our platform here.

And what about risks? Every company has them, and we've spotted 1 warning sign for Illinois Tool Works you should know about.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.