ITW - Embedded Expectations Analysis - 2021 01 05
Illinois Tool Works Inc. (ITW:USA) trades near historical highs relative to UAFRS-based (Uniform) earnings, with a 28.6x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management may be concerned about their segments' growth, operating margins, and auto supply chainSpecifically, management may have concerns about their Q4 performance, available M&A opportunities, and the sustainability of elevated Auto OEM demand. In addition, they may be exaggerating their auto supply chain's flexibility and the business' durability. Furthermore, management may lack confidence in their ability to sustain the growth of the Construction and Polymer & Fluids segments and mitigate organic revenue declines in the Food Equipment and Welding segments. Moreover, they may be concerned about the sustainability of customers' recovery and residential construction mix. Finally, management may lack confidence in their ability to further improve margins
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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