Illinois Tool Works Inc. ITW reported third-quarter 2024 adjusted earnings of $2.65 per share, which surpassed the Zacks Consensus Estimate of $2.53. Earnings increased 4% year over year.

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Illinois Tool’s revenues of $3.97 billion missed the consensus estimate of $4.01 billion. The top line declined 1.6% year over year owing to a decrease of 1.4% in organic sales. While acquisition increased revenues by 0.2%, unfavorable foreign currency translation had an adverse impact of 0.4%.

ITW’s Segmental Performance

Test & Measurement and Electronics’ revenues were down 0.2% year over year to $697 million. Our estimate for segmental revenues was $696.5 million. Revenues from Automotive Original Equipment Manufacturer decreased 3.3% year over year to $772 million. Our estimate for segmental revenues was $813.8 million.

Food Equipment generated revenues of $677 million, down 0.2% year over year. Our estimate for segmental revenues was $700.2 million. Welding revenues were $462 million, down 1.3% year over year. Our estimate for segmental revenues was $452.9 million.

Construction Products’ revenues were down 8.1% year over year to $479 million. Our estimate for segmental revenues was $510.1 million. Revenues of $438 million from Specialty Products reflected an increase of 5.7% year over year. Our estimate for segmental revenues was $417.5 million. Polymers & Fluids’ revenues of $448 million declined 1.9% year over year. Our estimate for segmental revenues was $463.6 million.

ITW’s Margin Profile

Illinois Tool’s cost of sales decreased 3.8% year over year to $2.23 billion. Selling, administrative and research and development expenses increased 7% year over year to $658 million. The operating margin was 26.5%, stable from the year-ago quarter. Enterprise initiatives contributed 130 basis points (bps) to the operating margin.

Balance Sheet and Cash Flow

At the end of the third quarter, Illinois Tool had cash and equivalents of $947 million compared with $1.1 billion at the end of December 2023. Long-term debt was $6.6 billion compared with $6.3 billion at the end of December 2023.

In the first nine months of 2024, Illinois Tool generated net cash of $2.2 billion from operating activities, reflecting a decline of 13.3% from the year-ago number. Capital spending on the purchase of plant and equipment was $319 million, down 1.5% year over year. Free cash flow of $1.85 billion decreased 15.1% year over year.

ITW’s 2024 Guidance

Illinois Tool expects earnings to be in the range of $11.63-$11.73 per share, higher than the earlier guidance of $10.30-$10.40 . Total revenues and organic revenues are expected to be flat. Operating margin is expected to be in the band of 26.5-27%. Enterprise initiatives are expected to contribute more than 100 bps to the operating margin.

Illinois Tool projects free cash flow to be approximately 100% of net income. The company expects to repurchase about $1.5 billion worth of shares. The effective tax rate is expected to be 21.5%.

Zacks Rank & Stocks to Consider

ITW currently carries a Zacks Rank #3 (Hold).

Some better-ranked companies are discussed below:

Graham Corporation GHM currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

GHM delivered a trailing four-quarter average earnings surprise of 133.2%. In the past 60 days, the Zacks Consensus Estimate for Graham’s fiscal 2025 earnings has remained stable.

Ingersoll-Rand plc IR presently carries a Zacks Rank of 2. IR delivered a trailing four-quarter average earnings surprise of 11%.

In the past 60 days, the consensus estimate for Ingersoll-Rand’s 2024 earnings has inched up 0.6%.

Parker-Hannifin Corporation PH currently carries a Zacks Rank of 2. PH delivered a trailing four-quarter average earnings surprise of 11.2%.

In the past 60 days, the consensus estimate for Parker-Hannifin’s fiscal 2025 (ending June 2025) earnings has increased 0.3%.

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Illinois Tool Works Inc. (ITW) : Free Stock Analysis Report

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Graham Corporation (GHM) : Free Stock Analysis Report

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