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Illinois Tool Works Inc ITW

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Morningstar’s Analysis

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No Surprises in Illinois Tool Works' Second-Quarter 2021 Results as We Maintain Fair Value Estimate

Joshua Aguilar Equity Analyst

Analyst Note

| Joshua Aguilar |

Nothing in ITW’s latest results materially alters our view of the firm or our long-term thesis. The narrow-moat, exemplary-rated firm’s quarterly results, including revenue, operating margins, and EPS (prior to the positive impact of a one-time $0.35 tax benefit related to the re-measurement of net deferred tax assets in the U.K.), were broadly in line with our expectations. Therefore, we maintain our fair value estimate of $183, even as the stock sold down about 1% on the trading day. While we’ve adjusted estimates upward on account of management’s raised organic top-line guide, this was fully offset by the effect of Morningstar’s probability-adjusted U.S. tax rate beginning in 2022.

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