As part of its key enterprise initiatives, industrial tool
Illinois Tool Works Inc.
) recently communicated that it has started searching for
suitable alternatives for its Industrial Packaging segment.
The review process will likely last throughout 2013 and includes
a sale or a spin-off of the segment as its favored options.
The Industrial Packaging segment engages in the production of
steel, plastic, and paper products used for bundling, shipping
and protecting transported goods. In 2012, roughly $2.4 billion
or 13.5% of the company's total revenue was derived from this
This step is the second of its kind in a row after the company
divested its Decorative Surfaces division in October, 2012. The
business sale fetched the company roughly $1.05 billion along
with a 49% stake in Wilsonart International Holdings, LLC, a new
company formed after the divestment.
Such strategic selling of not so profitable businesses works well
for the future growth of the company by freeing resources that
can be invested for development of core businesses. Based on its
portfolio management initiative along with business
simplification and strategic sourcing, the company aims to
achieve organic growth of about 200 basis points above industrial
production by 2017.
Operating margins and return on invested capital are targeted
to be above 20% by 2017. Free cash flow conversion is expected to
be 100% and earnings per share CAGR to be 12% beyond 2017.
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Illinois Tool Works Inc. currently has a Zacks Rank #4 (Sell).
Other stocks to watch out for are
Altra Holdings, Inc.
) having a Zacks Rank #1 (Strong Buy) while
Atlas Copco AB
) each has a Zacks Rank #2 (Buy).