Wednesday, July 27, 2011

ITW Q2 Earnings Report

Illinois Tool Works released their earnings and slightly missed the street expectations. ITW reported net earnings of $0.99 versus the street average of $1.02. The company had to discontinue some operations which caused the earnings from continuing operations to fall to $0.96/share. In June the company has released the information about the discontinued operations, and the same time has lowered their earnings forecast to be between $0.95-$1.01 per share.

ITW also barely missed the revenue expectations. It reported second quarter revenues at $4.81 billion; missing the expectations by $0.07 billion. Even though the revenues grew by 17.5%(100 basis points less than expected) compared to 2Q2010, it did not help the sell off in ITW stock today. The stock fell $4.67 or 8.2% on Tuesday.

The company had a very successful first quarter, and the analysts expected the same demand in the second quarter. Managements notes that the reason for a lower revenue growth in the second quarter was the "modest slowing in industrial markets." The organic revenues were 120 basis points lower than expected due to lower demand in Europe and Japan, but ITW's CEO says that he believes the markets are "in a long-term recovery mode."

Finally ITW reviewed their forecast for adjusted full year earnings to be $3.80; excluding the $0.33 tax gain received in Q1. The street was expecting full year earnings to be $3.92. ITW is still a strong player in the industrial sector, and they will recover from today's price drop.


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