Illinois Tool Works Modestly Higher Despite Double Upgrade From Goldman

Goldman Sachs has given Illinois Tool Works Inc. ITW a double upgrade from a Sell to a Buy rating, although shares have moved little since the announcement.

Initially, the firm rated Illinois Tool Works as a Sell for a short period due to the company’s high consumer exposure at 60 percent.

“We underappreciated the [extent] to which growth could improve … Now, we believe ITW is poised to beat-and-raise and we see upside to consensus 2017/18 EPS,” said Goldman analyst Joe Richie.

Justification For The Upgrade

The investment bank outlined three key points to confirm its latest view:

1. High quality franchise, growth improving.
2. Upside to margins.
3. Premium multiple deserved.

“We also think ITW’s relative premium is likely sustained as investors rotate into higher quality cyclicals in recognition of an improving growth backdrop but still elevated multiples,” said Richie.

Goldman Sachs has a $155 price target on Illinois Tool Works.