ITW - Embedded Expectations Analysis - 2019 09 03
Illinois Tool Works Inc. (ITW:USA) trades near corporate averages relative toUAFRS-based (Uniform) Earnings, with a 19.8x P/E. At these levels, the market has bullish expectations for the firm, but management has concerns about their operating margins, manufacturing capacity, and food retail growth.
Specifically, management may be concerned about the sustainability of recent operating margins, and they may be exaggerating their ability to take costs out of the business during a downturn. Furthermore, they may lack confidence in their ability to continue growing their businesses and manage manufacturing capacity. Moreover, they appear concerned about the sustainability of recent margin improvements from their Enterprise Initiatives, and they may be concerned about ongoing restructuring costs in their Welding business. Finally, they may be concerned about the sustainability of recent food retail growth.
Illinois Tool Works manufactures a range of industrial products and equipment. Automotive OEM segment produces components and fasteners for automotive-related applications. Food Equipment segment is engaged in commercial food equipment. Test and Measurement and Electronics segment produces equipment for testing and measuring of materials and structures. Welding segment produces arc welding equipment, consumables and accessories. Polymers and Fluids segment produces adhesives, sealants, lubrication and cutting fluids for auto aftermarket maintenance. Construction Products segment supplies fastening systems and solutions. Specialty Products segment is focused on patent protection.
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