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Illinois Tool Works Q2 Result Beats Estimates, Cuts FY21 Operating Margin Outlook

Illinois Tool Works Q2 Result Beats Estimates, Cuts FY21 Operating Margin Outlook
  • Illinois Tool Works Inc. (NYSE: ITWreported second-quarter operating revenue growth of 43% year-over-year to $3.68 billion (up 37% on an organic basis), beating the consensus of $3.54 billion.
  • Revenue by segments: Automotive OEM $707 million (+95.3% Y/Y), Food Equipment $514 million (+52.9% Y/Y), Test & Measurement and Electronics $606 million (+33% Y/Y), Welding $402 million (+35.2% Y/Y), Polymers & Fluids $466 million (+31.7% Y/Y), Construction Products $518 million (+37.7% Y/Y), and Specialty Products $471 million (+21.6% Y/Y).
  • GAAP EPS improved to $2.45 from $1.01 in 2Q20, beating consensus estimates of $2.05. EPS included a $0.35 one-time tax benefit related to the remeasurement of net deferred tax assets in the U.K.
  • The operating income increased 98.9% Y/Y to $893 million, and the margin expanded by 680 bps to 24.3%.
  • Illinois Tool generated cash from operating activities year-to-date of $1.16 billion, compared to $1.35 billion a year ago. Free cash flow of $1.02 billion.
  • FY21 Outlook: ITW expects GAAP EPS of $8.55 - $8.95 (vs. the consensus of $8.51), up from prior $8.20 - $8.60.
  • It raised organic growth outlook to 11% - 13% (prior 10% - 12%), lowered operating margin outlook by 50 bps to 24.5% - 25.5% (prior 25% - 26%), and Free cash flow to be ~100% of net income adjusted for Q2 one-time tax benefit.
  • The company said it is on pace to repurchase approximately $1 billion of its shares.
  • Price action: ITW shares are trading lower by 1.07% at $225.95 on the last check Friday.

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