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Illinois Tool Works Inc ITW

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Morningstar’s Analysis

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Illinois Tool Works: Strong Execution, but We’ve Fully Baked in These Expectations in Our Model

Joshua Aguilar Equity Analyst

Analyst Note

| Joshua Aguilar |

After reviewing narrow-moat rated Illinois Tool Works’ latest results, nothing materially alters our long-term view. While fourth-quarter sales, operating margins, and earnings outpaced our expectations, particularly on the margin front, free cash flow came in slightly under. That’s not surprising given working capital tends to be pro-cyclical. While full-year operating earnings exceeded our expectations, management’s 2021 guide came in slightly below our expectations, particularly in the organic revenue guide within ITW’s auto OEM, welding, and constructions products segments.

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Company Profile

Business Description

Illinois Tool Works is a diversified global manufacturer that produces specialized industrial equipment, consumables, and related services. The firm operates 87 global divisions through seven distinct operating segments: automotive OEM, construction products, food equipment, specialty products, test/measurement and electronics, polymers and fluids, and welding. About half of its revenue comes from its operations in North America, with the remainder originating from international markets. ITW takes a bottom-up and decentralized approach to portfolio management, with the exception that each segment must apply its 80/20 operating process modeled on the Pareto principle.

155 Harlem Avenue
Glenview, IL, 60025
T +1 847 724-7500
Sector Industrials
Industry Specialty Industrial Machinery
Most Recent Earnings Dec 31, 2020
Fiscal Year End Dec 31, 2020
Stock Type Cyclical
Employees 43,000