Illinois Tool Works Inc. ITW is scheduled to release first-quarter 2023 results on May 2, before the market open.
The Zacks Consensus Estimate for ITW’s first-quarter earnings has been revised downward by a penny in the past 60 days. However, the company has an impressive earnings surprise history, having outperformed the Zacks Consensus Estimate in three of the preceding four quarters, while missing in one. The average beat was 0.9%.
Let’s see how things are shaping up for Illinois Tool this earnings season.
Key Factors and Estimates for Q1
Illinois Tool is likely to have benefited from strong demand across most of its businesses in the first quarter of 2023. Strong organic growth in North America, Europe and China is expected to have boosted revenues in the Automotive OEM (Original Equipment Manufacturer) segment. The Zacks Consensus Estimate for the segment’s revenues in the first quarter indicates a 1.7% rise from the year-ago reported number.
The Food Equipment unit is expected to have been aided by growth across both North America and International operations in the to-be-reported quarter. The Zacks Consensus Estimate for the Food Equipment segment’s revenues suggests a 6.4% increase from the year-ago reported number.
Strength in the capital equipment business is likely to have driven the Test & Measurement and Electronics segment in the first quarter. The Zacks Consensus Estimate for revenues in the Test & Measurement and Electronics segment indicates a 1.9% rise from the year-ago reported quarter. For the first quarter, we expect the segment sales to increase 1.3% year over year.
The Welding segment is expected to reflect higher revenues on the back of solid industrial business in the first quarter. The Zacks Consensus Estimate for the Welding segment’s revenues suggests a 6.2% increase from the year-ago reported number.
However, reduced demand in the appliance components division is likely to have dented ITW’s Specialty products segment’s performance in the quarter. The Zacks Consensus Estimate for the Specialty Products segment’s revenues implies a 1.8% decrease from the year-ago reported number.
Rising costs of sales and selling, general and administrative expenses are likely to have dented ITW’s margins and profitability in the to-be-reported quarter. Given its substantial international presence, foreign-currency headwinds are expected to have affected its top line. The Zacks Consensus Estimate for ITW’s revenues in the first quarter suggests a 0.4% increase from the year-ago quarter’s reported number. We expect revenues to increase 0.3% from the year-ago period’s reported figure.
Our proven model suggests an earnings beat for ITW this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is the case here, as elaborated below. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.
Earnings ESP: ITW has an Earnings ESP of +1.37% as the Most Accurate Estimate is pegged at $2.22, higher than the Zacks Consensus Estimate of $2.19.
Zacks Rank: ITW presently carries a Zacks Rank of 3.
Highlights of Q4 Earnings
Illinois Tool reported fourth-quarter 2022 adjusted earnings of $2.34 per share, which missed the Zacks Consensus Estimate of $2.60. The bottom line jumped 20% year over year. Total revenues of $3,971 increased 7.9% year over year and surpassed the Zacks Consensus Estimate of $3,875 million. The top line was driven by the increase in sales in other segments except for the Speciality Products and Construction segment.
Other Stocks to Consider
Here are some other companies within the broader Industrial Products sector, which according to our model, have the right combination of elements to beat on earnings this reporting cycle.
Caterpillar CAT, which has an Earnings ESP of +1.52% and a Zacks Rank of 3, is scheduled to release first-quarter 2023 earnings numbers on Apr 27. You can see the complete list of today’s Zacks #1 Rank stocks here.
Caterpillar’s earnings have surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 9%.
A. O. Smith Corporation AOS has an Earnings ESP of +10.19% and a Zacks Rank of 3. The company is scheduled to release first-quarter 2023 results on Apr 27.
AOS’ earnings have surpassed the Zacks Consensus Estimate in three of the preceding four quarters while matching in one, the average beat being 3.2%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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