Illinois Tool Works Inc.
) reported an impressive result for the fourth quarter of 2013.
Earnings per share from continuing operations, excluding one-time
items, were recorded at 92 cents, reflecting an increase of 41.5%
over the year-ago earnings of 65 cents. The result also surpassed
the Zacks Consensus Estimate of 91 cents and was above the
mid-point of the company's guidance range of 85-93 cents.
The earnings improvement was the result of organic growth
increases witnessed in North American and in international
operations. Enterprise initiatives of Illinois Tool Works were
also a strong contributor to earnings growth.
In 2013, earnings per share from continuing operations, excluding
one-time items, were $3.63, up compared with $3.21 earned in 2012
and above the Zacks Consensus Estimate of $3.61. Results also
surpassed the mid-point of Illinois Tool Works' guidance range of
Illinois Tool's operating revenues in the fourth quarter
increased 4.8% year over year to $3,554 million. The increase was
above the mid-point of the company's guidance range of 2.0%-5.0%
and also marks an improvement over a fall of 4.4% recorded in the
previous quarter. Results also surpassed the Zacks Consensus
Estimate of $3,519 million.
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Organic revenue in the quarter grew 2.8% year over year,
registering roughly 2.6% increase in North America and an
increase of 3.3% in international revenues.
Illinois Tool Works reports its revenues under the following
heads/segments. A brief discussion has been provided below:
Test & Measurement and Electronics revenues increased 1.2%
year over year in the fourth quarter 2013; Automotive OEM
revenues were up 12.4%; Polymers & Fluids decreased by 2.4%;
Food Equipment went up 9.7%; Welding revenues increased by 1.7%;
Construction Products revenue were down 0.1% and Specialty
Products increased 9.1%.
In 2013, Illinois Tool Works' operating revenues came in at
$14,135 million, up 1.9% year over year and above the Zacks
Consensus Estimate of $14,098 million.
Cost of revenue in the fourth quarter went down 0.2% year over
year and represented 61.1% of total revenue, down from 62.5% in
the year-ago quarter. Selling, administrative, and research and
development expenses, as a percentage of total revenue, were
recorded at 19.4%. Adjusted operating margin in the quarter was
17.7%, up 270 basis points year over year.
Exiting the fourth-quarter 2013, Illinois Tool Works' cash and
cash equivalents were $3,618 million, up compared with $3,018
million in the previous quarter. Long-term debt was down 26.7%
sequentially, to $2,793 million.
Illinois Tool Works generated $708 million net cash flow from its
operating activities in the fourth quarter of 2013. This was an
increase over $605 million generated in the year-ago quarter. The
company used $111 million for additions to plant and equipments,
an increase over $108 million spent in the year-ago quarter.
Free cash flow in the quarter was $597 million, way above $497
million generated in the year-ago quarter.
For 2014, management of Illinois Tool Works anticipates total
revenue to grow in a range of 2.0%-4.0%. Organic revenue is
expected to grow within a 2.0%-3.0% range. Earnings per share are
expected to range within $4.30-$4.50.
For the first quarter of 2014, earnings per share from continuing
operations are expected to be within a range of 93 cents to $1.01
and total revenue growth is expected to vary within 3.0%-6.0%.
Illinois Tool Works is one of the leading manufacturers of
industrial products and equipments. The company has a $34.8
billion market capitalization and carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the industry include
Altra Industrial Motion Corp.
Barnes Group Inc.
). All these companies hold a Zacks Rank #2 (Buy).