Illinois Tool Works In-Line with Est - Analyst Blog
April 23 2013 - 7:24AM
Zacks
Illinois Tool Works Inc. (ITW) reported quite
decent financial results for the first quarter 2013. Earnings per
share from continuing operations, adjusted for one-time items, came
in at 96 cents. This denotes an increase of 8% over the year-ago
quarter while the earnings per share remain in line with the Zacks
Consensus Estimate.
Including a gain on incremental 51% acquisition, earnings per share
in the quarter were $1.01, up 6% year over year.
Revenue
Illinois Tool reported operating revenue of $4,009 million, down 8%
year over year and below the Zacks Consensus Estimate of $4,278
million. The poor results were due to the Decorative Surfaces
divestiture and weak organic revenue performance.
Organic revenue in the quarter was down by 2.7%, registering a 1.9%
decline in North American and 3.5% decline in international
revenues.
Illinois Tool has realigned its revenue segments, effective the
first quarter 2013; a brief discussion on the segments performance
is given below:
Test & Measurement and Electronics revenue declined 2.1% year
over year; Automotive OEM revenue increased 4.0%; Polymers &
Fluids dived south by 5.9%; Food Equipment went down by 1.2%;
Wielding was down by 4.8%; Construction Products declined 3.3%;
Specialty Products increased 3.6% and Industrial Packaging
plummeted 4.7%.
Margins
Cost of revenue for Illinois Tool in the first quarter went down
9.4% year over year and represented 62.4% of total revenue; down
from 63.4% in the year-ago quarter. Selling, administrative and
R&D expenses, as a percentage of total revenue, stood at 19.4%.
Adjusted operating margin in the quarter was 18.2%, up 60 basis
points year over year.
Balance Sheet
Exiting the first quarter 2013, Illinois Tool Work's cash and cash
equivalents stood at $2,662 million, down from $2,779.0 million in
the previous quarter. Long-term debt, net of current portion, also
registered a sequential decline from $4,589.0 million in the
previous quarter to $4,556.0 million in this quarter.
Cash Flow
Illinois Tool reported net cash flow from operating activities of
$366.0 million in the quarter, up from $323.0 million in the
year-ago quarter while capital expenditure was at $89 million
versus $84 million in the year-ago quarter. Free cash flow was
approximately $277.0 million as compared with $239 million in the
first quarter of 2012.
Outlook
For 2013, management of Illinois Tool now anticipates organic
revenue to grow in the range of 0%-2% as against 1% to 3% expected
earlier while total revenue growth is expected to be in the range
of 2%-4%. Mid-point of earnings per share from continuing
operations of $4.25 has been kept constant by the company, though
the range is now predicted to be $4.15-$4.35 versus $4.13-$4.37
expected earlier.
For the second quarter 2013, earnings per share from continuing
operations are expected to be within the $1.04-$1.12 range and
total revenue growth to vary within 2.5%-3.5%.
Also separately, Illinois Tool mentioned that the reclassification
of certain existing and previously divested business to
discontinued operations will dilute in earnings to the extent of 6
cents through the reminder of the year 2013.
Illinois Tool Works is one of the leading manufacturers of
industrial products and equipment. The stock currently has a Zacks
Rank #4 (Sell). Other stocks to watch out for are Tri-Tech
Holding, Inc. (TRIT), EnPro Industries,
Inc. (NPO) and The Babcock & Wilcox
Co. (BWC), each holding a Zacks Rank #1 (Strong Buy).
BABCOCK&WILCOX (BWC): Free Stock Analysis Report
ILL TOOL WORKS (ITW): Free Stock Analysis Report
ENPRO INDUS INC (NPO): Free Stock Analysis Report
TRI-TECH HOLDNG (TRIT): Free Stock Analysis Report
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