Zacks_Analysts' Blog : Earnings Preview: Illinois Tool - Analyst Blog

Illinois Tool Works Inc.(ITW) is slated to release its fourth quarter and fiscal year 2011 results on Tuesday, January 31, 2012. The current Zacks Consensus Estimate for earnings per share (EPS) is 88 cents, representing an annualized growth of 11.65%. Estimate for the fiscal year stands at $3.73 per share, up 23.21% year over year.

With respect to earnings surprises, over the trailing four quarters, Illinois Tool outperformed the Zacks Consensus Estimate in two quarters and underperformed in the other two quarters. The average earnings surprise was a positive 0.81%, implying that the company outperformed the Zacks Consensus Estimate by the same magnitude over the last four quarters.

Third Quarter Highlights

Illinois Tool's third quarter results were impressive as earnings per share from continuing operations escalated 25.0% year over year to $1.00. Results surpassed the Zacks Consensus Estimate of 98 cents per share and were a cent above the mid-point of management's guidance range of $0.95-$1.03.

With regard to the top line, operating revenue in the quarter increased 16.2% year over year to $4,580.5 million; above the Zacks Consensus Estimate of $4,556.0 million. The year-over-year increase in operating revenue symbolized continued improvement in end market demand. The year-over-year increase was roughly in line with management's projected growth range of 15%-18%.

For further details please follow the link: ITW's 3Q Surpasses Estimate

Agreement & Magnitude of Estimate Revisions

In the last 30 days, out of the analysts providing estimates, one lowered his earnings per share (EPS) estimate for the fourth quarter and fiscal year 2012. Apart from these, there was no change in estimates for the company.

Magnitude of the change was not substantial, as the fourth quarter 2011 and fiscal year 2012 estimates fell by a cent to 88 cents and $4.14 per share. These represented year-over-year growth of 11.65% and 10.94%, respectively.

Our Take

For the fourth quarter 2011, we prefer remaining on the sidelines based on management's cautious outlook for the quarter. EPS guidance range of 86-94 cents stands below the company's third quarter reported EPS of $1.00, with the mid-point representing a 10% fall from the latter. Illinois Tools anticipates soft European revenue, higher restructuring costs and no contributions from currency translation in the fourth quarter.

Taking these factors into account, we have set our fourth quarter estimate at 88 cents per share, roughly 12% down sequentially. The forthcoming results are expected to be softer on a sequential comparison, with some elevation expected from acquisitions, share buybacks and dividend payments.

Illinois Tool Works is one of the leading manufacturers of industrial products and equipment.  The company faces stiff competitions from its peers including Cooper Industries plc (CBE), General Electric Co. (GE), and Manitowoc Co. Inc. (MTW).