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By Jason Stipp | 06-15-2010 02:52 PM

Does ITW's Outlook Reflect an Upbeat Economy?

Morningstar's Eric Landry on what bellwether Illinois Tool Works' raised forecast could indicate for industrial firms, the economy, and the business outlook in Europe.

Securities mentioned in this video
ITW Illinois Tool Works Inc

Jason Stipp: I'm Jason Stipp for Morningstar. Illinois Tool Works raised its second-quarter forecast today. This company, considered a bellwether among industrials. Here to talk about what it might mean for the company and what it could tell us about the economy, is Morningstar's Eric Landry. He is associate director of equity research for industrial companies. Thanks for being here, Eric.

Eric Landry: Hi, Jason.

Stipp: So, ITW raised its second quarter forecast, tell us a little bit about what was behind that? What gave them the confidence to do that?

Landry: Well, we're five-twelfths of the way into the year and they are two-thirds of the way into their second quarter, and obviously, things are going better than they thought. The good thing about covering Illinois Tool Works is, they release their revenues every month, so analysts have a good idea of what's going on. And it is pretty obvious to us, even last month and the month before that, things are going to go up on annual basis for this company, things are really, really hot in Illinois Tool Works right now.

Stipp: So, where are they seeing the most traction? Where are they the seeing hottest sales?

Landry: Well, it's interesting, because they've got 800 different businesses in 57 different countries, and the good thing about Illinois Tool Works is they've very short-cycle businesses, so it doesn't take six months to build one of their products and ship it out. It takes minutes. So, they are very sensitive to the economic changes throughout the world. And in addition to that, they've got several early-cycle businesses like auto, general industrial, and res[idential] construction. So, they are feeling very strong momentum yet in auto and general industrial, res construction as well.

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