ITW Disposes of Meyercord - Analyst Blog

Illinois Tool Works Inc. (ITW) disposed of its wholly-owned subsidiary, Meyercord Revenue Inc. to SICPA Product Security LLC for an undisclosed amount. The business was stated to be unfit for Illinois Tool's long-term growth platform. SICPA Product Security is a private company specializing in security technology for currency and tax collection.

 

Meyercord Revenue, acquired by Illinois Tool in the late 1990s, primarily produced tobacco tax stamps for U.S. states and municipalities. With annual sales of roughly $30 million, Meyercord Revenue provides 250 different tax stamps to 47 states and about 147 municipalities and Native American tribes.

 

Illinois Tool follows a strategy to grow its presence in sectors like industrial packaging, fasteners, welding machinery and commercial kitchen equipment. Selling off Meyercord Revenue will enable the company to concentrate on its expansion program in these sectors. However, Illinois Tool has retained a related business that manufactures and services tax stamp application equipment.

 

Illinois Tool Works, operating through 840 business units in 57 countries, is one of the leading manufacturers of industrial products and equipment.

For the third quarter of 2010, management offers its guidance for earnings per share from continuing operations which comes to approximately 72-84 cents based on total revenue growth assumption of 9%-13%. For full-year 2010, the company expects EPS to be within the $2.82-$3.08 range based on revenue growth expectations of 11%-13%.

 
We believe that the company's growth stems from its ability to develop new and improved products as well as broadening the range of application of established products. Developing new methods, processes and equipment along with acquisitions give the company a big push.

 
Moreover, new products are designed to be more cost effective with the manufacturing processes made simpler, by reducing the number of parts in an assembly or improving the quality of customers' assembled products.

 

Prime competitors of Tool Works include Cooper Industries plc (CBE), General Electric Co. (GE), and Manitowoc Co. Inc. (MTW). We currently maintain our Neutral recommendation on the stock, which is in line with the Zacks #3 Rank (Hold).