Illinois Tool Works Q2 Profit Beats View; Lifts 2015 Earnings Outlook

(RTTNews) - Industrial equipment maker Illinois Tool Works Inc. (ITW) on Wednesday reported a 68 percent decline in profit for the second quarter from last year on lower revenues, while the prior-year quarter's results were boosted by income from discontinued operations of almost $1 billion.

However, earnings per share from continuing operations for the latest quarter beat analysts' expectations, while revenues missed their estimates. Looking ahead to fiscal 2015, the company raised its earnings outlook, but lowered its organic revenue growth forecast.

Scott Santi, chairman and chief executive officer of ITW said, "ITW continues to execute very well in the face of an external operating environment that remains challenging on a number of levels. In the second quarter, the company delivered solid EPS growth with record operating margin of 21.3 percent and after-tax return on invested capital above 20 percent."

The company's net income for the second quarter was $480 million or $1.30 per share, down from $1.49 billion or $3.66 per share in the previous-year quarter. The prior-year quarter's results include income from discontinued operations of $998 million or $2.45 per share.

Earnings from continuing operation for the quarter declined to $480 million from $494 million in the prior-year period, while earnings per share rose to $1.30 from $1.21 last year on lower number of shares outstanding.

On average, 17 analysts polled by Thomson Reuters expected the company to earn $1.28 per share for the quarter. Analysts' estimates typically exclude special items.

Total operating revenues for the quarter decreased 8 percent to $3.43 billion from $3.72 billion in the year-ago period, due to the impact of foreign currency translation. Analysts had a consensus revenue estimate for the quarter of $3.45 billion.

However, ITW noted that organic revenue growth improved slightly in the quarter. Organic growth in the company's automotive OEM and food equipment segments along with improving demand trends in the construction products business were offset by the impact of the soft capital spending environment on the welding and test & measurement and electronics segments.

Growth was positive for both North America and International, with Europe up 2 percent.

Operating income for the quarter decreased 4 percent from the year-ago period to $730 million, while operating margin increased 80 basis points to 21.3 percent. Of this, enterprise initiatives contributed 100 basis points.

Looking ahead to the third quarter, ITW forecast earnings per share in a range of $1.32 to $1.40 and organic revenue be flat to up 1 percent. Analysts expect the company to report earnings of $1.37 per share for the quarter on revenues of $3.49 billion.

For fiscal 2015, ITW raised its earnings per share guidance by $0.05 at the midpoint to reflect second-quarter results and current exchange rates.

The updated earnings pr share range is $5.07 to $5.23, an increase of 10 percent at the $5.15 midpoint. Excluding the negative currency impact, full-year earnings would be up 18 percent at the midpoint. Organic revenue growth for the year is now projected to be approximately 1 percent.

Earlier, the company had forecast full-year earnings of $5.00 to $5.20 and organic revenue growth of 1 to 2 percent.

The Street expects the company to report earnings per share of $5.13 for the year on revenues of $13.68 billion.

ITW is trading at $90.60, down $1.56 or 1.69 percent on a volume of 1.33 million shares.