Industrial component manufacturer Illinois Tool Works (NYSE: ITW) has faced a difficult October, with analysts at multiple firms lowering price targets or downgrading ratings. However, the reasoning behind the massive $80 price target reduction from analysts at JPMorgan Chase (NYSE: JPM) was less about the strength of the business overall and more about its place in the broader sector—and in the overall health of industrials names heading to the end of the year.
Though industrials stocks have generally performed well as a group this year, short-cycle businesses—those for which customers place and receive orders within a span of just days or weeks—may be experiencing decelerating demand amid a piecemeal recovery to manufacturing that has seen new orders rebound at a faster pace than production backlogs have been able to clear. While this could be bad news for ITW, there remain some companies in the sector that may still be in a favorable position.
