Illinois Tool Works Q2 Profit Surges, Tightens 2014 Earnings Outlook

(RTTNews) - Industrial equipment maker Illinois Tool Works Inc. (ITW) on Tuesday reported a surge in profit for the second quarter from last year, reflecting higher revenues and margins. Looking ahead to fiscal 2014, the company tightened its earnings outlook, but maintained its revenue growth forecast range.

The company's net income for the second quarter was $1.49 billion or $3.66 per share, up from $465 million or $1.03 per share in the year-ago period.

The latest quarter's results include income from discontinued operations of $998 million or $2.45 per share, compared to income from discontinued operations of $49 million or $0.11 per share in the year-ago period.

During the quarter, Illinois Tool Works completed the sale of its Industrial Packaging segment to private equity firm Carlyle Group LP (CG) for $3.2 billion, and also completed the associated share repurchase program.

Earnings from continuing operation for the quarter increased to $494 million or $1.21 per share from $416 million or $0.92 per share a year ago. On average, eighteen analysts polled by Thomson Reuters expected the company to earn $1.20 per share for the quarter. Analysts' estimates typically exclude special items.

According to the company, the strong growth in earnings per share was largely due to ongoing contributions from enterprise initiatives as well as the completion of a previously announced share repurchase program.

Total operating revenues for the quarter rose 4 percent to $3.72 billion from $3.59 billion in the year-ago period. Analysts had a consensus revenue estimate for the quarter of $3.75 billion.

Organic revenues for the quarter increased 1.4 percent, with international revenues rising 2.0 percent and North America revenues increasing 1.0 percent. Internationally, European and Asia Pacific organic revenues grew 1 percent and 7 percent, respectively.

Operating income for the quarter rose 21 percent from the year-ago period to $763 million, while operating margin increased 300 basis points to 20.5 percent. Of this, enterprise initiatives contributed 120 basis points.

Looking ahead to the third quarter, Illinois Tool Works forecasts earnings in a range of $1.19 to $1.27 per share, on revenue growth of 3 percent to 4 percent. Analysts expect the company to earn $1.23 per share for the quarter on revenues of $3.72 billion.

For fiscal 2014, Illinois Tool Works raised its midpoint and narrowed its earnings per share outlook to a range of $4.50 to $4.62 from the prior range of $4.45 to $4.65 per share. The mid-point for the revised outlook represents a 26 percent increase compared to last year.

However, the company maintained its outlook for full-year revenue to grow in a range of 3 percent to 4 percent.

Street expects the company to earn $4.57 per share for the year on revenues of $14.74 billion.

ITW is trading at $84.50, down $0.25 or 0.29 percent on a volume of 461,244 shares.