Illinois Tool Works Q3 Earnings: Can NYSE:ITW Hit Its $1.45 EPS Target?

in EARNINGS/INVESTING IDEAS by

Illinois Tool Works Inc. (NYSE:ITW) is scheduled to report Q3 earnings results on October 23, 2020.

The company is expected to report earnings of $1.45/share on revenue of $2.943 billion. The consensus earnings per share (EPS) of $1.45/share is based on a poll of 14 analysts and represents a decline in eps of −26.7% over the same quarter last year, when the company reported earnings of $1.97/share.

The revenue forecast of $2.943 billion based on a poll of 16 analysts implies a year-over-year (YoY) decline in revenue of −15.4%. Last year the company reported $3.479 billion in revenue for the quarter.

Expected to report EPS contraction of −26.7% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $2,942.51 $3,479.00 −15.4%
EPS $1.45 $1.97 −26.7%

Earnings Call Trends

Historically, management has exceeded analyst expectations 6 out of the last 8 tracked quarters, and missed expectations 2 quarters.

What are your expectations from Illinois Tool Works Inc. for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $0.69 $1.01 45.8% Beat
Q1, 2020 $1.69 $1.77 4.6% Beat
Q4, 2019 $1.86 $2.21 19.2% Beat
Q3, 2019 $1.95 $1.97 1.3% Beat
Q2, 2019 $1.98 $1.91 −3.5% Missed
Q1, 2019 $1.82 $1.81 −0.7% Missed
Q4, 2018 $1.82 $1.83 0.5% Beat
Q3, 2018 $1.88 $1.90 0.9% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price did not react much to the update.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
July 31, 2020 $185.67 $184.99 −0.4% Decline
May 5, 2020 $158.34 $158.78 0.3% Increase
January 31, 2020 $177.90 $174.98 −1.6% Decline
October 25, 2019 $160.13 $171.81 7.3% Increase

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −2.92, the model suggests that the company is not likely to be an earnings manipulator. A value of −2.92 implies a 0.2% chance of earnings manipulation.

Fundamentals And Technical Analysis

Illinois Tool Works Inc. is currently trading at $202.42/share, down −2.0% for the day. The company is trading at approximately 97.4% of its 52-week high of $207.75/share. The company’s stock price is up 9.4% since the last earnings report and down −0.4% over the previous week.

The company’s 14 Day Relative Price Index (RSI) of 56.23 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NYSE:ITW Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 29.28 and a forward P/E multiple of 35.50.

Illinois Tool Works Inc.’s current share price also implies a price-to-book (P/B) multiple of 27.15. The following table summarizes some other key fundamental ratios:

Data as of October 20, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $202.42
P/E Ratio 29.3x
P/E Ratio (Fwd) 35.5x
PEG Ratio −3.5
Total Debt / Total Capital 10.6%
Levered Free Cash Flow $2.757 billion
EV / EBITDA 21.0x

Finbox

Illinois Tool Works Inc. is a large-cap stock with a market capitalization of $63.998 billion and a total enterprise value of $69.956 billion. The company operates in the Industrials sector and the Machinery industry.

Illinois Tool Works Inc. manufactures and sells industrial products and equipment worldwide. It operates through seven segments: Automotive OEM; Food Equipment; Test & Measurement and Electronics; Welding; Polymers & Fluids; Construction Products; and Specialty Products. The Automotive OEM segment offers plastic and metal components, fasteners, and assemblies for automobiles, light trucks, and other industrial uses. The Food Equipment segment provides warewashing, cooking, refrigeration, and food processing equipment; kitchen exhaust, ventilation, and pollution control systems; and food equipment maintenance and repair services. The Test & Measurement and Electronics segment produces equipment, consumables, and related software for testing and measuring of materials and structures, as well as equipment and consumables used in the production of electronic subassemblies and microelectronics. The Welding segment produces arc welding equipment; and metal arc welding consumables and related accessories. The Polymers & Fluids segment produces adhesives, sealants, lubrication and cutting fluids, and fluids and polymers for auto aftermarket maintenance and appearance. The Construction Products segment offers engineered fastening systems and solutions for the residential construction, renovation/remodel, and commercial construction markets. The Specialty Products segment offers beverage packaging equipment and consumables, product coding and marking equipment and consumables, and appliance components and fasteners. It serves the automotive OEM/tiers, commercial food equipment, construction, general industrial, and automotive aftermarket end markets. The company distributes its products directly to industrial manufacturers, as well as through independent distributors. Illinois Tool Works Inc. was founded in 1912 and is headquartered in Glenview, Illinois.

Expertise: financial modeling, mergers & acquisitions. Andy is also a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to do investment research. Andy’s background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights: - Sears Holdings Corp.’s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores. - Cerberus Capital Management’s $3.3 bn acquisition of SUPERVALU Inc.’s New Albertsons, Inc. assets. Andy can be reached at andy@finbox.io or at +1 (516) 778-6257.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.