Illinois Tool Works Inc. (ITW), a global multi-industrial company engaged in the manufacturing and selling of industrial products and equipment, reported impressive fiscal 2024 third-quarter results. The company’s EPS of $3.91 surpassed the consensus estimate of $2.52.
Further, the company reported record revenue from Automotive OEM and Test & Measurement and Electronics segments totaling $772 million and $697 million for the third quarter, respectively.
ITW continued to demonstrate its commitment to returning value to shareholders. The company's Board of Directors declared a dividend of $1.50 per share of its stock for the fourth quarter of 2024, payable on January 10, 2025, to shareholders of record as of December 31, 2024.
ITW delivers differentiated performance and has established itself as one of the best-performing, highest-quality, and most respected industrial companies. With the increasing adoption of automation and smart technologies and rapid industrialization accelerating industrial machinery operations across the globe, Illinois Tool’s future prospects are robust.
The global industrial machinery market is anticipated to register a CAGR of 7.5%, resulting in a market volume of $1.20 trillion by 2032, driven by trends like investments in Industry 4.0 and IoT technologies transforming the scope and scale of the industrial landscape.
ITW’s shares have increased 14% in price in the past six months and 12.5% over the past year to close the last trading session at $275.27.
Let’s look at factors that could influence ITW’s performance in the upcoming months.
Robust Financials
During the third quarter that ended September 30, 2024, ITW reported operating revenue of $3.97 billion, and its operating income was $1.05 billion for the same period. The company’s income before taxes rose 34.4% from the year-ago value to $1.36 billion.
In addition, the company’s net income amounted to $1.16 billion or $3.91 per share, reflecting growth of 50.3% and 53.3% from the prior year’s quarter, respectively. Also, ITW’s cash and equivalents and total assets came in at $947 million and $15.82 billion as of September 30, 2024.
The company raised its full-year EPS guidance by $1.33 to a range of $11.63 to $11.73 per share from the previous range of $10.30 to $10.40.
Impressive Historical Growth
ITW’s revenue grew at a CAGR of 3.8% over the past three years, while its EBITDA improved at a CAGR of 5.5%. Its EBIT increased at a CAGR of 6.2% over the same period, while the company's net income and EPS grew at respective CAGRs of 8.2% and 10.3% over the same time frame.
Also, the company’s normalized net income and levered free cash flow increased at CAGRs of 6.1% and 13.1% over the same timeframe, respectively.
Favorable Analyst Estimates
Analysts expect ITW’s revenue for the fourth quarter (ending December 2024) to come in at $4 billion, indicating a marginal increase year-over-year, and the consensus EPS estimate of $2.51 for the same period represents a 3.9% improvement year-over-year. Moreover, the company has surpassed the consensus EPS estimates in all of the trailing four quarters.
For the fiscal year (ending December 2024), the company’s EPS is anticipated to grow 5.4% year-over-year to $10.23, while its revenue is expected to be $15.99 billion for the same year. In addition, Street expects its revenue and EPS for the fiscal year 2025 to grow 2.9% and 5.2% from the prior year to $16.46 billion and $10.76, respectively.
High Profitability
ITW’s trailing-12-month gross profit margin of 43.89% is 38.6% higher than the 31.67% industry average. Its trailing-12-month EBIT margin and net income margin of 26.67% and 21.66% are significantly higher than the industry averages of 10.39% and 6.49%, respectively. Likewise, the stock’s trailing-12-month levered FCF margin of 16.05% is 138% higher than the industry average of 6.74%.
Furthermore, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 108.07%, 23.31%, and 21.83% are favorable, compared to the 13.26%, 7.20%, and 5.33% industry averages, respectively.
POWR Ratings Reflect Promise
ITW’s robust fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to a Buy in our proprietary system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. ITW has an A grade for Quality, consistent with its higher-than-industry profitability. It has a B grade for Sentiment, justified by its positive analysts’ expectations.
Also, with a 24-month beta of 0.88, the stock has earned a grade of B for Stability.
ITW is ranked #19 among the 79 stocks in the A-rated Industrial - Machinery industry.
Beyond what I have stated above, we have also given ITW grades for Growth, Momentum, and Value. Get access to all the ITW ratings here.
Bottom Line
ITW is a leading industrial company operating through its seven segments, catering to a wide variety of requirements. The company's operational diversity allows it to generate multiple revenues and maintain a solid operational margin. In its last reported quarter also, the company maintained an operating margin of 26.5%.
Further, with sound financial performance, stable cash flow, and robust profitability, ITW’s growth appears promising.
Therefore, given these favorable trends and robust growth outlook, it could be wise to invest in this stock.
How Does Illinois Tool Works Inc. (ITW) Stack Up Against Its Peers?
While ITW has an overall POWR Rating of B, investors could also check out these other stocks within the A-rated Industrial - Machinery industry with A (Strong Buy) or B (Buy) ratings: Smiths Group PLC (SMGZY), TechnoPro Holdings Inc. ADR (TCCPY), and Amada Co. Ltd. ADR (AMDLY).
For exploring more A and B-rated industrial - machinery stocks, click here.
What To Do Next?
Get your hands on this special report with 3 low priced companies with tremendous upside potential even in today’s volatile markets:
3 Stocks to DOUBLE This Year >
ITW shares were trading at $275.34 per share on Friday afternoon, up $0.07 (+0.03%). Year-to-date, ITW has gained 6.91%, versus a 28.99% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
Is Illinois Tool Works a Reliable Pick for Long-Term Gains? StockNews.com
