I've liked Illinois Tool Works (NYSE:ITW) for a while now, and the shares have continued to reward a positive stance (up about 7% since my last update, a little below 3M (NYSE:MMM), but in line with Parker-Hannifin (NYSE:PH) and better than Dover (NYSE:DOV)). Now, though, I'm starting to wonder whether this relatively conservatively-run company can keep finding enough ways to meet ever-higher expectations in this early recovery cycle. Illinois Tool Works has already achieved a lot with its self-help initiatives, and I have to believe that the low-hanging fruit has been plucked. I'd also note that while ITW management has indicated that it will continue to pursue incremental M&A, there's nothing to suggest a major move.
Right now it looks as though the Street is factoring in some combination of high single-digit free cash flow growth or a mid-single-digit total return. Neither is really appealing at this point; not when names like Honeywell (NYSE:HON), Danaher (NYSE:DHR), Fortive (NYSE:FTV), Parker-Hannifin, and ABB (NYSE:ABB) appear to have more to offer in terms of relative valuation, near-term growth leverage, and/or self-help potential.
Well Rewarded For Past Performance, What Is Left For Illinois Tool Works?