ITW Beats Est., Ups FY12 Outlook - Analyst Blog


Illinois Tool Works Inc. ( ITW ) reported its financial results for the first quarter 2012 on April 24. Earnings per share from continuing operations were 97 cents, representing a year-over-year increase of 10.2%. Earnings were 2 cents above the Zacks Consensus Estimate of 95 cents and at the top-end of management's guidance range of 89-97 cents.


Operating revenue in the first quarter increased 6.4% year over year to $4,547 million, but failed to surpass the Zacks Consensus Estimate of $4,598 million. The year-over-year increase in operating revenue symbolized continued improvement in end market demand. The year-over-year improvement was towards the lower-end of management's projected growth range of 6.0%-9.0%.

Of the total revenue, base revenue in the quarter grew 3.2% year over year, registering a 6.6% increase in North American and flat international revenues. Acquisitions added 4.4% while currency translation negatively impacted revenue growth by 1.3%.


Cost of goods sold in the quarter increased 5.4% year over year and represented 64.0% of total revenue; down from 64.7% in the year-ago quarter. Selling, administrative and R&D expenses, as a percentage of total revenue, stood at 18.9%. Operating margin in the quarter was 15.5%, up 10 basis points year over year.

Balance Sheet

Exiting the first quarter, Illinois Tool Works' cash and cash equivalents increased 10.7% sequentially to approximately $1,304.0 million. Long-term debt, net of current portion increased to $3,521.0 million from $3,488.2 million in the fourth quarter of 2011.

Cash Flow

Net cash flow from operating activities in the quarter was $323.0 million, up from $145.0 million in the year-ago quarter. Capital expenditure decreased to $84.0 million versus $89.0 million in the year-ago quarter. Free cash flow was approximately $239.0 million versus $56.0 million in the first quarter of 2011.

In the first quarter, the company distributed $174 million as dividends and repurchased shares worth $474 million. The company is still left with $3.4 billion in its share buyback program.


Driven by impressive first quarter results and share buyback activities, management raised its fiscal year 2012 earnings guidance from its earlier range of $4.02-$4.26 to $4.14-$4.38 per share. Revenue growth forecast were revised from 5%-8% range to 5%-7% range. Earnings for the second quarter of 2012 are expected to be within the $1.08-$1.16 range based on total revenue growth assumption of 3.5%-6.0%.

Pre-tax gains of $450 million incurred from the divestment of non-core assets to Graco Inc. ( GGG ) will be recorded in the second quarter financials.

Illinois Tool Works is one of the leading manufacturers of industrial products and equipment. The company's chief competitors include Cooper Industries plc ( CBE ), General Electric Co. ( GE ) and Manitowoc Co. Inc. ( MTW ).

We currently maintain a Neutral recommendation on the stock.

COOPER INDS PLC ( CBE ): Free Stock Analysis Report
GENL ELECTRIC ( GE ): Free Stock Analysis Report

GRACO INC ( GGG ): Free Stock Analysis Report
ILL TOOL WORKS ( ITW ): Free Stock Analysis Report
MANITOWOC INC ( MTW ): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: CBE , GE , GGG , ITW , MTW

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