Illinois Tool Works Inc.

Illinois Tool Works continues to face various challenges in this operating environment which is why it had a mixed financial performance in the last quarter of the year. The company exceeded the revenue expectations of Wall Street as demand remains solid across the majority of its portfolio. Automotive OEM revenues were up, and food equipment delivered a very strong quarter. Institutional and restaurants were up and test and measurement grew with continued robust demand for capital equipment, as seen by Instron. Welding delivery had quite a strong organic growth in the quarter, with a rise in equipment and consumables. On the commercial side, organic growth was down and demand continued to slow. Fluids and polymers delivered organic growth with a rise in the automotive aftermarket business. The company sees meaningful improvements in moderating input cost inflation and supply chain performance but it failed to meet the earnings expectations of analysts. The management claims to have made solid progress in the integration of very high-quality acquisition in the MTS test as well as simulation business. We give the company a ‘Hold’ rating with a revised target price.