Citigroup Reiterates Neutral Rating, $60 PT on Illinois Tool Works
In a report published Monday, Citigroup reiterated its Neutral rating and $60.00 price target on Illinois Tool Works (NYSE: ITW).
Citigroup noted, “ITW unveiled its highly anticipated total savings target for its sweeping business simplification and sourcing initiatives at its well-attended NYC analyst meeting. The headline $600-$800 mil net savings target bracketed our $750 mil est but it looks to have been mostly priced in, contributing to the 3% decline in the stock on Friday. We believe the 20%+ operating margin target by 2017 from 16% today is reasonable, but we doubt the path will be as linear as management is targeting. By our estimates, our $750 mil net savings est by 2017 has an NPV of $4.50 or about 7.5% of upside to the stock. This is arguably priced in, given the impressive 850 bps YTD of outperformance for ITW. As for ITW's 2013 outlook, we estimate the targeted 1%-3% organic revenue growth plus margin and tax guidance imply $4.15-$4.35 vs the $4.42 consensus, with commentary on 2H-weighted. We are reducing our 2013/2014 EPS ests by 15c each to $4.25/$4.55, maintain our $60 target, and reiterate our Neutral rating.”
Illinois Tool Works closed on Friday at $59.82.
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