Illinois Tool Works 3Q profit rises, revenue falls
BY SANDRA GUY Business Reporter firstname.lastname@example.org October 23, 2012 7:38AM
Updated: November 25, 2012 11:34AM
Illinois Tool Works reported a better than expected profit Tuesday but reduced its revenue outlook for the year as the global economy slows.
The Glenview-based industrial equipment maker, which makes fasteners, construction tools and restaurant supplies among other categories, has been roiled by last week’s announcement that CEO David Speer was taking a medical leave of absence, and activist shareholder demands that it start acquiring fast-growing companies.
Scott Santi, the acting CEO, president and chief operating officer, gave no further information about Speer’s leave during the earnings announcement Tuesday. He told investors that everything is “business as usual.”
ITW reported third-quarter earnings of $1.09 a share, besting analysts’ expectations of $1.06. Net income increased 3.4 percent to $524 million.
But the company missed revenue projections with a 1.7 percent decline to $4.5 billion, versus analysts’ forecasts of $4.57 billion.
The company lowered its 2012 yearly revenue outlook to between $4.06 and $4.14, versus analysts’ outlook of $4.11. The previous forecast had ranged from $4.03 per share to $4.19.
Morningstar analyst James Krapfel said ITW is making progress in its previously announced plan to divest 51 percent of its decorative surfaces business and to put strategic leaders into general manager roles.
“Over the past 10 years, ITW’s organic growth has been really low — about 1 percent,” Krapfel said.
Now that the company’s goal is to acquire fast-growing companies likely to be international businesses, ITW may have to pay more because those companies will draw more competitive bidding and larger prices than the slow-growth strategy, Krapfel said.
“Industrial production is a good proxy for ITW’s prospects,” he said. “Certain markets such as Asia are flowing but things are flattening out.”
ITW’s shares gained 17 cents, or 0.28 percent, to close at $60.73 Tuesday.