Wednesday, July 25, 2018

Illinois Tool Works Loses A Little Luster

A quarter ago I said I preferred Honeywell (HON) and Eaton (ETN) to Illinois Tool Works (ITW), and in the three months since Honeywell and Eaton have outperformed Illinois Tool Works by about 10%. Now, Illinois Tool Works shareholders are left to digest a second straight disappointing quarter - while ITW hit the organic revenue growth target this time, segment EBIT missed expectations by a few percentage points and management lowered guidance.

I'm not too surprised that Illinois Tool Works is seeing higher than expected cost pressures; if anything, that's a theme this quarter in the industrials. I'm more surprised, though, by what looks like weaker results in areas like auto and electronics relative to peers like 3M (MMM), Danaher (DHR), and Stanley Black & Decker (SWK). With weaker prospects for beat-and-raise quarters across the industrial/multi-industrial landscape, I'm more worried about the risk of re-rating in the second half of 2018 (multiples shrinking back toward historical norms).

Follow this link for the full article:
Illinois Tool Works Loses A Little Luster

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