Illinois Tool Works Inc.
) reported quite decent financial results for the first quarter
2013. Earnings per share from continuing operations, adjusted for
one-time items, came in at 96 cents. This denotes an increase of
8% over the year-ago quarter while the earnings per share remain
in line with the Zacks Consensus Estimate.
Including a gain on incremental 51% acquisition, earnings per
share in the quarter were $1.01, up 6% year over year.
Illinois Tool reported operating revenue of $4,009 million, down
8% year over year and below the Zacks Consensus Estimate of
$4,278 million. The poor results were due to the Decorative
Surfaces divestiture and weak organic revenue performance.
Organic revenue in the quarter was down by 2.7%, registering a
1.9% decline in North American and 3.5% decline in international
Illinois Tool has realigned its revenue segments, effective the
first quarter 2013; a brief discussion on the segments
performance is given below:
Test & Measurement and Electronics revenue declined 2.1% year
over year; Automotive OEM revenue increased 4.0%; Polymers &
Fluids dived south by 5.9%; Food Equipment went down by 1.2%;
Wielding was down by 4.8%; Construction Products declined 3.3%;
Specialty Products increased 3.6% and Industrial Packaging
Cost of revenue for Illinois Tool in the first quarter went down
9.4% year over year and represented 62.4% of total revenue; down
from 63.4% in the year-ago quarter. Selling, administrative and
R&D expenses, as a percentage of total revenue, stood at
19.4%. Adjusted operating margin in the quarter was 18.2%, up 60
basis points year over year.
Exiting the first quarter 2013, Illinois Tool Work's cash and
cash equivalents stood at $2,662 million, down from $2,779.0
million in the previous quarter. Long-term debt, net of current
portion, also registered a sequential decline from $4,589.0
million in the previous quarter to $4,556.0 million in this
Illinois Tool reported net cash flow from operating activities of
$366.0 million in the quarter, up from $323.0 million in the
year-ago quarter while capital expenditure was at $89 million
versus $84 million in the year-ago quarter. Free cash flow was
approximately $277.0 million as compared with $239 million in the
first quarter of 2012.
For 2013, management of Illinois Tool now anticipates organic
revenue to grow in the range of 0%-2% as against 1% to 3%
expected earlier while total revenue growth is expected to be in
the range of 2%-4%. Mid-point of earnings per share from
continuing operations of $4.25 has been kept constant by the
company, though the range is now predicted to be $4.15-$4.35
versus $4.13-$4.37 expected earlier.
For the second quarter 2013, earnings per share from continuing
operations are expected to be within the $1.04-$1.12 range and
total revenue growth to vary within 2.5%-3.5%.
Also separately, Illinois Tool mentioned that the
reclassification of certain existing and previously divested
business to discontinued operations will dilute in earnings to
the extent of 6 cents through the reminder of the year 2013.
Illinois Tool Works is one of the leading manufacturers of
industrial products and equipment. The stock currently has a
Zacks Rank #4 (Sell). Other stocks to watch out for are
Tri-Tech Holding, Inc.
EnPro Industries, Inc.
The Babcock & Wilcox Co.
), each holding a Zacks Rank #1 (Strong Buy).
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