Illinois Tool Works
Illinois Tool Works (ITW) reported its third-quarter earnings on October 24. The company reported an EPS of $1.90—an increase of 11% compared to the previous year. Illinois Tool Works managed to beat analysts’ estimates of $1.88 per share. However, the company didn’t meet the revenue expectations. The company reported revenues of $3.61 billion—flat compared to the previous year. Analysts expected Illinois Tool Works to post revenues of $3.72 billion.
Illinois Tool Works made minor adjustments to its 2018 EPS. The company expects its adjusted EPS to be $7.55–$7.65 compared to the previous guidance of $7.50–$7.70.
Scott Santi, Illinois Tool Works’ chairman and CEO, said, “Despite some near-term market challenges in the third quarter, the ITW team delivered 11 percent earnings growth and EPS at the high end of our guidance range. We improved operating margin by 30 basis points to 24.6 percent, with continued strong execution of Enterprise Initiatives contributing 100 basis points of margin expansion. Pricing actions more than offset material cost inflation on a dollar for dollar basis, and price/cost margin percentage dilution showed sequential improvement versus the second quarter.”
Stock price update
Illinois Tool Works stock declined ~2.3% and closed at $124.1 for the week ending October 26. The decline in the stock price caused the stock to trade 11.3% below the 100-day moving average price of $139.93. However, the stock has fallen 25.6% on a year-to-date basis. Honeywell (HON), Stanley Black & Decker (SWK), and Caterpillar (CAT) have declined 3.7%, 35.0%, and 27%, respectively.
Illinois Tool Works’ RSI (relative strength index) of 32 indicates that the stock is very close to being “oversold.” An RSI of 30 and below indicates that the stock has temporarily moved into the “oversold” position.
Investors could hold Illinois Tool Works by investing in the Invesco Dynamic Large Cap Value ETF (PWV), which has invested 3.2% of its portfolio in Illinois Tool Works as of October 26.