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What Drove Illinois Tool Works to a New 52-Week High?

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Shares of Illinois Tool Works Inc.ITW reached a new 52-week high of $106.75 on Jun 1, before closing the trading session slightly lower at $106.70. The last 52-week high of $106.19 was achieved on Apr 19.

The new apex reflects a year-to-date return of 15.8%. The trading volume for the session was 2.7 million shares. Earnings estimate revisions for 2016 and 2017, along with an expected earnings growth rate of 8.9% for the next five years, indicate the scope for stock price appreciation.

Growth Drivers

Illinois Tool Works impressed investors with better-than-expected results for the trailing four quarters, bringing the average positive surprise to 1.95%. The company recorded a positive earnings surprise of 2.38%, with earnings of $1.29 per share exceeding the Zacks Consensus Estimate of $1.26, for first-quarter 2016. Revenues totaled $3,274 million in the quarter, above the Zacks Consensus Estimate of $3,247 million. The company's share price has gained roughly 2.3% since its first-quarter earnings release on Apr 20.

For 2016, Illinois Tool Works increased its earnings guidance to $5.40−$5.60 from the previous expectation of $5.35−$5.55 per share. Organic revenue growth is expected to be 1−3%. Operating margin will likely be over 22.5%, driven by a contribution of at least 100 bps from the company's enterprise initiatives. Also, the company intends to repurchase shares worth $2 billion during the year.

Going forward, Illinois Tool Works' organic growth tactics, long-term Enterprise Strategy and sound capital allocation schemes should prove beneficial. Also, the acquisition of EF&C business will boost the company's product offerings under its Automotive OEM segment.

Estimate Revisions

Over the last 60 days, the Zacks Consensus Estimate for Illinois Tool Works grew 1.1% to $5.53 for 2016 and 1.2% to $6.06 for 2017. These estimates represent year-over-year growth of 7.7% for 2016 and 9.6% for 2017. Also, the company has an Earnings ESP of +2.31% for 2017.

With a market capitalization of $38.3 billion, Illinois Tool Works currently carries a Zacks Rank #3 (Hold). Some stocks worth considering in the machinery industry include Gorman-Rupp Co. GRC , Kadant Inc. KAI and Luxfer Holdings PLC LXFR . All these stocks sport a Zacks Rank #1 (Strong Buy).

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

ILL TOOL WORKS (ITW): Free Stock Analysis Report

KADANT INC (KAI): Free Stock Analysis Report

GORMAN RUPP CO (GRC): Free Stock Analysis Report

LUXFER HOLDINGS (LXFR): 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 Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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