ITW Beats Est., Ups FY12 Outlook - Analyst Blog
April 24 2012 - 10:57AM
Zacks
Illinois Tool Works Inc. (ITW) reported its
financial results for the first quarter 2012 on April 24. Earnings
per share from continuing operations were 97 cents, representing a
year-over-year increase of 10.2%. Earnings were 2 cents above the
Zacks Consensus Estimate of 95 cents and at the top-end of
management’s guidance range of 89-97 cents.
Revenue
Operating revenue in the first quarter increased 6.4% year over
year to $4,547 million, but failed to surpass the Zacks Consensus
Estimate of $4,598 million. The year–over-year increase in
operating revenue symbolized continued improvement in end market
demand. The year-over-year improvement was towards the lower-end of
management’s projected growth range of 6.0%-9.0%.
Of the total revenue, base revenue in the quarter grew 3.2% year
over year, registering a 6.6% increase in North American and flat
international revenues. Acquisitions added 4.4% while currency
translation negatively impacted revenue growth by 1.3%.
Margins
Cost of goods sold in the quarter increased 5.4% year over year
and represented 64.0% of total revenue; down from 64.7% in the
year-ago quarter. Selling, administrative and R&D expenses, as
a percentage of total revenue, stood at 18.9%. Operating margin in
the quarter was 15.5%, up 10 basis points year over year.
Balance Sheet
Exiting the first quarter, Illinois Tool Works’ cash and cash
equivalents increased 10.7% sequentially to approximately $1,304.0
million. Long-term debt, net of current portion increased to
$3,521.0 million from $3,488.2 million in the fourth quarter of
2011.
Cash Flow
Net cash flow from operating activities in the quarter was
$323.0 million, up from $145.0 million in the year-ago quarter.
Capital expenditure decreased to $84.0 million versus $89.0 million
in the year-ago quarter. Free cash flow was approximately $239.0
million versus $56.0 million in the first quarter of 2011.
In the first quarter, the company distributed $174 million as
dividends and repurchased shares worth $474 million. The company is
still left with $3.4 billion in its share buyback program.
Outlook
Driven by impressive first quarter results and share buyback
activities, management raised its fiscal year 2012 earnings
guidance from its earlier range of $4.02-$4.26 to $4.14-$4.38 per
share. Revenue growth forecast were revised from 5%-8% range to
5%-7% range. Earnings for the second quarter of 2012 are expected
to be within the $1.08-$1.16 range based on total revenue growth
assumption of 3.5%-6.0%.
Pre-tax gains of $450 million incurred from the divestment of
non-core assets to Graco Inc. (GGG) will be
recorded in the second quarter financials.
Illinois Tool Works is one of the leading manufacturers of
industrial products and equipment. The company’s chief competitors
include Cooper Industries plc (CBE),
General Electric Co. (GE) and Manitowoc
Co. Inc. (MTW).
We currently maintain a Neutral recommendation on the stock.
COOPER INDS PLC (CBE): Free Stock Analysis Report
GENL ELECTRIC (GE): Free Stock Analysis Report
GRACO INC (GGG): Free Stock Analysis Report
ILL TOOL WORKS (ITW): Free Stock Analysis Report
MANITOWOC INC (MTW): Free Stock Analysis Report
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