Illinois Tool Gains On 3Q Sales Beat; Analyst Sticks To Hold

Shares of Illinois Tool Works closed 2.5% higher on Friday after the company reported better-than-expected 3Q results. The manufacturer and seller of industrial products and equipment reported revenues of $3.3 billion that surpassed analysts’ expectations of $2.98 billion. Moreover, its 3Q earnings of $1.83 per share beat Street estimates of $1.47.

Illinois’ (ITW) both top and bottom line registered a year-over-year decline. Its revenues and EPS decreased by 5.7% and 10.3%, respectively, but marked solid sequential improvement of 29% and 81%.

Illinois CEO E. Scott Santi said, “We saw solid recovery progress in many of the end markets we serve in the third quarter as evidenced by our revenue being up sequentially 29 percent versus second quarter. He further added, “our third quarter financial results support the decisions we made early in the pandemic to provide full compensation and benefits support to all of our ITW team members, to focus on positioning the company for full participation in the recovery, and to remain invested in the key initiatives supporting the execution of our long-term enterprise strategy.” (See ITW stock analysis on TipRanks).

Ahead of the earnings, Deutsche Bank analyst Nicole Deblase raised the stock’s price target on October 13 to $173 (16.3% downside potential) from $168. However, Deblase retained a Hold rating on Illinois Tool as she is cautious about a “high probability of macro volatility muddling share price reactions.” She also said that given a 15% upside in multi-industry and machinery stocks since 2Q earnings season, expectations are “undeniably higher now.”

Currently, the Street is sidelined on the stock. The Hold analyst consensus is based on 8 Holds, 2 Buys and 2 Sells. With shares up over 15% year-to-date, the average price target of $189.92 implies downside potential of about 8.1% to current levels.

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