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Reasons Why You Should Avoid Betting on Illinois Tool (ITW)
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Illinois Tool Works Inc.’s (ITW - Free Report) recent operational performance failed to impress investors due to tough market conditions and other challenges, which are likely to hurt its earnings in the near term.
Image Source: Zacks Investment Research
The presently Zacks Rank #4 (Sell) player has a market capitalization of $55.5 billion. In the past year, the stock has lost 22.3% compared with the industry’s decline of 25.7%.
Let’s discuss the factors that might continue taking a toll on Illinois Tool.
Supply-Chain Constraints:Adverse impacts on auto production due to supply-chain restrictions are weighing on ITW’s Automotive OEM segment’s sales, which dipped 3% in the first quarter of 2022. The segment’s organic revenues were down 1% year over year. Illinois Tool expects supply-chain woes to keep affecting the Automotive OEM segment in the quarters ahead.
Escalating Costs and Expenses: Illinois Tool’s rising cost of sales and selling, administrative, and research and development expenses pose a threat to its bottom line. ITW’s cost of sales increased 15.6% year over year, while selling, administrative, and research and development expenses grew 15.2% in the Marchquarter. ITW’s first-quarter operating margin witnessed an adverse impact of 250 bps due to price/costs. Raw material cost inflation and shortage of components in Automotive OEM are hurting ITW’s margins.
Unfavorable Forex: Illinois Tool is exposed to adverse foreign currency movements, given its widespread presence in the international markets. For instance, in first-quarter 2022, forex woes adversely affected ITW’s sales by 2.2% year over year. For 2022, management predicts an adverse impact of 1.5% on sales from unfavorableforeign currency translation.
Southbound Estimate Trend: In the past 60 days, the Zacks Consensus Estimate for second-quarter 2022 earnings has been revised 0.4% downward.
Stocks to Consider
Some better-ranked companies from the industrial products sector are discussed below:
GEF’s earnings estimates have increased 17.8% for fiscal 2022 (ending October 2022) in the past 60 days. Its shares have inched up 5.5% in the past year.
Titan International, Inc. presently has a Zacks Rank of 1. Its earnings surprise in the last four quarters was 56.4%, on average.
In the past 60 days, TWI’s earnings estimates have increased 43.3% for 2022. The stock has surged 78.7% in the past year.
RBC Bearings Incorporated presently has a Zacks Rank#2 (Buy). ROLL’s earnings surprise in the last four quarters was 3.4%, on average.
In the past 60 days, the stock’s earnings estimates have increased 7% for fiscal 2023 (ending March 2023). The stock has inched up 2% in the past year.
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Reasons Why You Should Avoid Betting on Illinois Tool (ITW)
Illinois Tool Works Inc.’s (ITW - Free Report) recent operational performance failed to impress investors due to tough market conditions and other challenges, which are likely to hurt its earnings in the near term.
Image Source: Zacks Investment Research
The presently Zacks Rank #4 (Sell) player has a market capitalization of $55.5 billion. In the past year, the stock has lost 22.3% compared with the industry’s decline of 25.7%.
Let’s discuss the factors that might continue taking a toll on Illinois Tool.
Supply-Chain Constraints:Adverse impacts on auto production due to supply-chain restrictions are weighing on ITW’s Automotive OEM segment’s sales, which dipped 3% in the first quarter of 2022. The segment’s organic revenues were down 1% year over year. Illinois Tool expects supply-chain woes to keep affecting the Automotive OEM segment in the quarters ahead.
Escalating Costs and Expenses: Illinois Tool’s rising cost of sales and selling, administrative, and research and development expenses pose a threat to its bottom line. ITW’s cost of sales increased 15.6% year over year, while selling, administrative, and research and development expenses grew 15.2% in the Marchquarter. ITW’s first-quarter operating margin witnessed an adverse impact of 250 bps due to price/costs. Raw material cost inflation and shortage of components in Automotive OEM are hurting ITW’s margins.
Unfavorable Forex: Illinois Tool is exposed to adverse foreign currency movements, given its widespread presence in the international markets. For instance, in first-quarter 2022, forex woes adversely affected ITW’s sales by 2.2% year over year. For 2022, management predicts an adverse impact of 1.5% on sales from unfavorableforeign currency translation.
Southbound Estimate Trend: In the past 60 days, the Zacks Consensus Estimate for second-quarter 2022 earnings has been revised 0.4% downward.
Stocks to Consider
Some better-ranked companies from the industrial products sector are discussed below:
Greif, Inc. (GEF - Free Report) presently sports a Zacks Rank #1 (Strong Buy). GEF delivered a trailing four-quarter earnings surprise of 22.9%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
GEF’s earnings estimates have increased 17.8% for fiscal 2022 (ending October 2022) in the past 60 days. Its shares have inched up 5.5% in the past year.
Titan International, Inc. presently has a Zacks Rank of 1. Its earnings surprise in the last four quarters was 56.4%, on average.
In the past 60 days, TWI’s earnings estimates have increased 43.3% for 2022. The stock has surged 78.7% in the past year.
RBC Bearings Incorporated presently has a Zacks Rank#2 (Buy). ROLL’s earnings surprise in the last four quarters was 3.4%, on average.
In the past 60 days, the stock’s earnings estimates have increased 7% for fiscal 2023 (ending March 2023). The stock has inched up 2% in the past year.