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Illinois Tool Works Inc ITW

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Morningstar’s Analysis

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ITW Posts Solid Q3 Results Despite the Difficult Operating Environment; Maintaining FVE

Joshua Aguilar Senior Analyst

Analyst Note

| Joshua Aguilar |

After reviewing narrow-moat-rated ITW’s third-quarter results, nothing in these numbers materially alters our long-term view of the firm. While we modestly reduced our 2021 full-year sales and EPS projections by 2% and 5%, respectively, time value of money more than offset any fair value impact in our model. Therefore, we maintain our fair value estimate of $183. We now expect that full-year sales will increase nearly 14% to $14.3 billion (or nearly 12% on an organic basis), and for GAAP EPS to increase about 27% to $8.48. Furthermore, we expect free cash flow conversion of about 90%, implying free cash flow of $2.4 billion.

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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 Sep 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Cyclical
Employees 43,000