Industrial tool maker Illinois Tool Works Inc. ITW recently hosted its Investors Day 2015 on Dec 4. Focusing on its long-term growth strategies, the company updated its enterprise initiatives as well as provided financial targets for 2016. A brief discussion on the event has been provided below.
Illinois Tool Works reaffirmed its performance goals for 2017. The reiterated targets include organic revenue growth of 200 basis points (bps) above global Gross Domestic Product (“GDP”), operating margin of above 23% and return on invested capital (“ROIC”) of above 20%. Also, the company claimed that commendable progress on enterprise strategies will enable them to attain their performance goals on time.
In addition, Illinois Tool Works initiated its financial guidance for 2016. The company anticipates earnings within $5.35−$5.55 per share, roughly a 7% year-over-year increase at mid-point. Adverse foreign currency movements will negatively impact earnings growth by 3%. Organic revenue growth is expected to be 1−3%, including 90 bps of adverse impact from product line simplification initiative.
We believe Illinois Tool Works’ well-diversified product portfolio and a large customer base hold strong potential. Also, the company’s strategic initiaves will help it ensure maximum profitability through development of improved products and reasonable cost-control.
With a market capitalization of $34.3 billion, Illinois Tool Works currently carries a Zacks Rank #3 (Hold). The company’s share price gained 2.12% on Dec 4 while the Earnings ESP of the stock is +2.48% for fourth-quarter 2015 and +0.78% for first-quarter 2016. The Zacks Consensus Estimate for the stock stands at $5.11 per share for 2015 and $5.51 per share for 2016, representing year-over-year growth of 9.5% and 7.8%, respectively.
Better-ranked stocks in the sector include Encore Wire Corp. WIRE, iRobot Corporation IRBT and John Bean Technologies Corporation JBT. While Encore Wire sports a Zacks Rank #1 (Strong Buy), both iRobot Corporation and John Bean Technologies carry a Zacks Rank #2 (Buy).
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