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Earnings Review and Free Research Report: Illinois Tool Works Delivered Record Financial Results; Raised Earnings Guidance for 2017

Monday, 31 July 2017 07:00 AM

Pro-Trader Daily

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LONDON, UK / ACCESSWIRE / July 31, 2017 / Pro-Trader Daily has just published a free post-earnings coverage on Illinois Tool Works Inc. (NYSE: ITW) ("ITW"), which can be viewed by registering at http://protraderdaily.com/optin/?symbol=ITW, following the Company's announcement of its financial results on July 24, 2017, for Q2 FY17. The Company reported GAAP EPS increase of 16% y-o-y, and a revenue increase of 4.9% y-o-y with an operating margin of 24.3%, an increase of 120 bps y-o-y which is an all-time record for the Company. Our daily stock reports are accessible for free, and with those to look forward today you also will be signing up for a complimentary member's account at:

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Get more of our free earnings reports coverage from other constituents of the Diversified Machinery industry. Pro-TD has currently selected Colfax Corporation (NYSE: CFX) for due-diligence and potential coverage as the Company announced on July 28, 2017, its financial results for Q2 2017. Register for a free membership today, and be among the early birds that get access to our report on Colfax when we publish it.

At Pro-TD, we make it our mission to bring you news that matter about the stock you follow. Today, our research desk covers a blog story on ITW; also brushing on CFX. With the links below you can directly download the report of your stock of interest free of charge at:

http://protraderdaily.com/optin/?symbol=ITW

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Earnings Reviewed

ITW generated operating revenues of $3.60 billion for Q2 FY17 compared to $3.43 billion for Q2 FY16, noting y-o-y increase of 4.9% y-o-y. The Company's revenue numbers met analysts' estimations of $3.60 billion. ITW noted that foreign currency translation reduced revenue by 1.2% in the reported quarter.

The Company's operating income for Q2 FY17 was $874 million compared to $792 million for Q2 FY16, an increase of 10.35% y-o-y and was the highest quarterly income total in the Company's history.

Net income for Q2 FY17 was $587 million compared to $525 million in Q2 FY16, an increase of 11.8% y-o-y. ITW's net income per share in Q2 FY17 was $1.69 diluted compared to $1.46 diluted, an increase of 15.7% y-o-y. Excluding a $0.03 per share benefit from a legal settlement ITW's EPS came in at $1.66, which was ahead of Wall Street's forecasts of $1.63. The Company also enhanced its total current assets in Q2 FY17 to $6.57 billion compared to $6.12 billion in Q2 FY16, an increase of 7.35% y-o-y.

Segment Information

In Q2 FY17, ITW's Automotive OEM division's revenue surged 22.2% to $820 million; operating income of $182 million' and operating margin of 22.3%, down 350 basis points (bps).

In the Food Equipment segment, the Company recorded total revenues of $529 million, down 1.4% on a y-o-y basis; while its operating income came in at $139 million and operating margin was 26.4% in Q2 FY17, up 140 bps on a y-o-y basis.

ITW's Test & Measurement and Electronics division reported total revenues of $519 million, representing growth of 2.55 on a y-o-y basis; operating income of $114 million; and operating margin of 21.9% in Q2 FY17, surging 330 bps compared to the year ago same period.

In its Welding division, ITW generated total revenues of $385 million, up 2.9% on a y-o-y basis, while it recorded operating income of $105 million and operating margin of 27.2 % in Q2 FY17; adding 230 bps.

In its Polymers & Fluids, ITW generated total revenues of $437 million, down 1.3%; operating income of $94 million; and operating margin of 21.4% in Q2 FY17, up 50 bps. ITW's Construction Products segment generated total revenues of $425 million, up 0.4%; operating income of $102 million; and operating margin of 24.0% in Q2 FY17, down 30 bps.

The Company's Specialty Products segment generated total revenues of $490 million, adding 1.1%; operating income of $139 million; and operating margin of 28.3% in Q2 FY17, increasing 230 bps on a y-o-y basis.

Cash Matters

In Q2 FY17, ITW reported net cash provided by operating activities of $464 million compared to $535 million in Q2 FY16, a decrease of 13.27% y-o-y. The Company also noted free cash flow of $387 million in Q2 FY17 compared to $471 million in Q2 FY16; a decrease of 17.83% y-o-y.

ITW also reported free cash flow to net income conversion rate of 66% for Q2 FY17 compared to 90% in Q2 FY16. The Company, however, noted that excluding $115 million related to an additional discretionary pension contribution, the free cash flow to net income conversion rate for Q2 FY17 would have been 85%. Considering the pension contribution, the Company noted an adjusted free cash flow of $502 million in Q2 FY17.

Outlook

ITW raised its 2017 full-year EPS guidance by $0.12 at the midpoint based on its strong Q2 FY17 results. Now, the Company expects earnings to be in the range of $6.32 to $6.52 per share, up from its prior guidance of $6.20 to $6.40 per share, with organic revenue growth of 2% to 4%. ITW expects operating margin of approximately 24% and free cash flow to exceed 100% of net income. The Company projects an effective tax rate of approximately 29%. For the third quarter of 2017, the Company expects earnings to be in the range of $1.57 to $1.67 per share with organic growth of 1% to 3%.

Stock Performance

Illinois Tool Works' share price finished last Friday's trading session at $140.83, marginally advancing 0.01%. A total volume of 1.31 million shares have exchanged hands, which was higher than the 3-month average volume of 1.20 million shares. The Company's stock price surged 1.98% in the last three months, 9.29% in the past six months, and 22.08% in the previous twelve months. Additionally, the stock gained 15.00% since the start of the year. Shares of the Company have a PE ratio of 22.80 and have a dividend yield of 1.85%. The stock currently has a market cap of $48.65 billion.

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