Illinois Tool Works Posts Upbeat Q2 Results, Raises Guidance

Illinois Tool Works Inc. (ITW) reported stronger-than-expected Q2 results, topping both earnings and revenue estimates driven by robust organic growth across all segments.

Shares of the manufacturer of industrial products and equipment worldwide have gained 22% over the past year. (See ITW stock charts on TipRanks)

Adjusted earnings of $2.45 per share leaped 143% year-over-year and beat analysts’ expectations of $2.04 per share. The company reported earnings of $1.01 per share in the prior-year period.

Revenues jumped 43% year-over-year to $3.7 billion and exceeded consensus estimates of $3.52 billion. The increase in revenues reflected solid, double-digit organic growth across all seven segments, led by Automotive OEM (up 84%) and Food Equipment (up 46%).

Notably, operating profit margins jumped 680 bps to 24.3% compared to 17.5% reported in the prior-year quarter.

Based on the strong Q2 results, the company raised its guidance for FY2021. ITW now forecasts GAAP earnings in the range of $8.55 to $8.95 per share, while the consensus estimate is pegged at $8.51 per share. The company previously expected earnings in the range of $8.20 to $8.60 per share.

Furthermore, organic revenue is projected to grow 11% to 13% compared to FY2020.

ITW CEO E. Scott Santi commented, “While the near-term environment is certainly not without its challenges, order intake rates in all segments and geographic regions remain strong and I have no doubt that we are well positioned to continue to execute at a high level as we move through the remainder of the year.”

Deutsche Bank analyst Nicole Deblase recently increased the price target on ITW from $227 to $238 (5% upside potential) and maintained a Hold rating.

Deblase said the overall expectations for the sector are much lower than the last quarter based on a 7% underperformance versus the S&P 500 since the end of Q1.

Overall, the stock has a Hold consensus rating based on 3 Buys and 4 Holds. The average Illinois Tool Works price target of $237.30 implies 4.7% upside potential from current levels.