Illinois Tool Works Inc.
(
ITW
) reported fourth quarter 2012 earnings per share from continuing
operations, adjusted for one-time items, of 89 cents, a cent
above the year-ago adjusted results of 88 cents.
The results, however, were a cent short of the Zacks Consensus
Estimate of 90 cents and within management's guidance range,
excluding a gain on divestiture of Decorative Surfaces and other
discrete corporate and tax items of 86-94 cents.
For 2012, adjusted earnings came in at $4.09 per share, up 9.9%
year over year. The results were in line with the Zacks Consensus
Estimate of $4.09 and within management's guidance range,
excluding a gain on divestiture of Decorative Surfaces and other
discrete corporate and tax items of $4.06-$4.14 per share.
Revenue
Decorative Surfaces divestiture and negative foreign currency
translation impact pulled down operating revenue in the fourth
quarter by 2.3% year over year to $4,221.0 million. The results,
however, surpassed the Zacks Consensus Estimate of $4,149.0
million and the year-over-year decrease was within management's
expectation of a 1% to 4% decline in the quarter.
Base revenue in the quarter grew 0.6% year over year, registering
a 1.6% increase in North American and 0.5% decline in
international revenues.
On a segmental basis, Transportation revenue increased 4.8% year
over year; Power Systems & Electronics declined 1.2%;
Industrial Packaging plummeted 1.2%; Food Equipment went down by
1.8% while Construction increased 1.3%; Polymers & Fluids
dropped by 2.9%; and All Other jumped 6.9%.
For 2012, operating revenue was $17,924.0 million, up 0.8% year
over year and above the Zacks Consensus Estimate of $17,856.0
million. The yearly growth was within management's expected range
of 0%-1%.
Margins
Cost of goods sold in the fourth quarter went down 2.6% year over
year and represented 64.6% of total revenue; down from 64.8% in
the year-ago quarter. Selling, administrative and R&D
expenses, as a percentage of total revenue, stood at 19.3%.
Operating margin in the quarter was 14.4%, down 60 basis points
year over year.
Balance Sheet
Exiting the fourth quarter, Illinois Tool Works' cash and cash
equivalents stood at $2,779.0 million, up 35.3% sequentially.
Long-term debt, net of current portion also registered a
sequential increase from $4,572.0 million in the previous quarter
to $4,589.0 million in the fourth quarter 2012.
Cash Flow
Net cash flow from operating activities in the quarter was $605.0
million, down from $712.0 million in the year-ago quarter while
capital expenditure increased 14.9% to $108.0 million. Free cash
flow was approximately $497.0 million in the fourth quarter
versus $618.0 million in the comparable quarter last year.
In the quarter, the company distributed $350 million as dividends
and repurchased shares worth $604 million.
Outlook
For 2013, management anticipates organic revenue to grow 1% to 3%
as both North America and international operating regions of the
company witness modest growth while total revenue is expected to
grow within the 3%-5% range. For the first quarter, total revenue
growth is expected to be flat to down 2%.
For the first quarter 2013, earnings per share from continuing
operations are expected to be within 91-99 cents and within
$4.13-$4.37 range for full year 2013.
Illinois Tool Works is one of the leading manufacturers of
industrial products and equipment. The stock currently has a
Zacks Rank #3 (Hold). Other stocks to watch out for are
Altra Holdings, Inc.
(
AIMC
) and
Metso Corp.
(
MXCYY
), both with a Zacks Rank #1 (Strong Buy) and
Gorman-Rupp Co.
(
GRC
) with a Zacks Rank #2 (Buy).
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