ITW Rev Updated, Guidance Intact - Analyst Blog

Illinois Tool Works Inc. (ITW) reported a 13% year-over-year rise in its operating revenues for the three months ended August 31, 2010.  The increase records a 12% growth attributable to a hike in base revenue and 3% to acquisitions. Currency translation had a negative 2.0% impact on the revenue. End markets were strong with solid demand for the company's products.
 
Transportation revenue grew by 22.0% year over year, while Industrial Packaging by 15.5%. Power Systems and Electronics registered an increase of 24.7%. Construction Products grew by 11.5% and Polymers and Fluids by 9.9%. Revenue from all other sources soared 19.7%. The improvement was partially offset by a decline of 3.4% in Food Equipment and 2.9% in Decorative Surfaces.
 
Illinois Tool Works also reiterated its earlier earnings per share (EPS) from continuing operations guidance for the third quarter 2010 at 72–84 cents. The guidance is based on total revenue growth expectations in the range of 9%–13%. For full-year 2010, the company still hopes that EPS would be within the $2.82-$3.08 range based on revenue growth expectations of 11%-13%.
 
Illinois Tool Works, operating through 840 business units in 57 countries is one of the leading manufacturers of industrial products and equipment.  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. Improvising and 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 by eliminating steps in manufacturing processes, reducing the number of parts in an assembly, or by improving the quality of customers' assembled products.
 
Prime competitors 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 Rank of #3 (Hold).