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Illinois Tool Works (ITW) and Target (TGT): Growth and Income Stocks
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Illinois Tool Works (ITW - Free Report) reported Q4 17 earnings results before the opening bell on Wednesday January 24th where it beat the Zacks consensus earnings and revenue estimates for the second consecutive quarter. The company saw revenues improve by +7%, and EPS grew by +17% YoY. Further operating margins rose by 160 basis points to +23.4%.
The company also saw improvements in organic growth with revenues, and earnings up +4%, and +3% respectively. Moreover, organic revenue growth was positive in six out of seven segments with the Test & Measuring and Electronics up +9%, Welding up +6%, and Specialty Products improving by +5%.
Due to the tax law change, and improving economy, management increased Q1 18, and FY 2018 EPS guidance. 2018 guidance was increased by $0.40 to a range of $7.45-7.65, up from the previous guidance range of $7.05-7.25. Q1 18 EPS was lifted from the consensus estimate of $1.75 to a range between $1.80-1.90.
Management also stated that they now plan on accelerating its previously announced plans to increase its dividend payout. The Board of Directors are expecting to increase its dividend payout ratio from 43% to 50% of free cash flows in August of 2018. Currently, ITW has an annual dividend yield of +1.8% before the upcoming increase.
As you can see in the Price and Earnings Consensus graph below, the stock has been on a steady uptick since the beginning of 2016, and this earnings report along with increased EPS guidance for Q1 18 and FY 18 are expected to propel the stock price even higher.
Target Corp (TGT - Free Report) preannounced its holiday sales before its Q4 earnings report due on February 27th, and they were much better than initially expected. Comparable sales improved by +3.4% compared to the guided range of 0-2%. The company stated that holiday results were positive in all categories due to strong traffic, and online digital growth. Further, TGT did not experience a dip between the Thanksgiving and Christmas holidays as had been in the past. Due to these factors management increased EPS guidance for Q4 from a range between $1.05-1.25 to a range of $1.30-1.40.
To add to this positive news, management commented that this upwards trend is now expected to continue through 2018 as they increased 2018 EPS guidance as well; 2018 was previously guided between $4.64-4.74, and is now expected to be in a range of $5.15-5.45.
Management also stated that its efforts in the digital realm have remained strong as digital channel sales are expected to grow by more than +25% in Q4 17 marking the fourth consecutive year of above +25% digital sales growth.
The company currently plans on opening 30 small format stores in FY 2018, and will be remodel 325 stores during the year as well.
As you can see in the two tables below, the increased guidance and better than expected holiday sales resulted positive estimate revisions. In the Agreement table, you can see that all coverage analysts increased their future earnings estimates. In the Magnitude table, you can see the extent of the upgrades in dollar form.
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Illinois Tool Works (ITW) and Target (TGT): Growth and Income Stocks
Illinois Tool Works (ITW - Free Report) reported Q4 17 earnings results before the opening bell on Wednesday January 24th where it beat the Zacks consensus earnings and revenue estimates for the second consecutive quarter. The company saw revenues improve by +7%, and EPS grew by +17% YoY. Further operating margins rose by 160 basis points to +23.4%.
The company also saw improvements in organic growth with revenues, and earnings up +4%, and +3% respectively. Moreover, organic revenue growth was positive in six out of seven segments with the Test & Measuring and Electronics up +9%, Welding up +6%, and Specialty Products improving by +5%.
Due to the tax law change, and improving economy, management increased Q1 18, and FY 2018 EPS guidance. 2018 guidance was increased by $0.40 to a range of $7.45-7.65, up from the previous guidance range of $7.05-7.25. Q1 18 EPS was lifted from the consensus estimate of $1.75 to a range between $1.80-1.90.
Management also stated that they now plan on accelerating its previously announced plans to increase its dividend payout. The Board of Directors are expecting to increase its dividend payout ratio from 43% to 50% of free cash flows in August of 2018. Currently, ITW has an annual dividend yield of +1.8% before the upcoming increase.
As you can see in the Price and Earnings Consensus graph below, the stock has been on a steady uptick since the beginning of 2016, and this earnings report along with increased EPS guidance for Q1 18 and FY 18 are expected to propel the stock price even higher.
Illinois Tool Works Inc. Price and Consensus
Illinois Tool Works Inc. Price and Consensus | Illinois Tool Works Inc. Quote
Target Corp (TGT - Free Report) preannounced its holiday sales before its Q4 earnings report due on February 27th, and they were much better than initially expected. Comparable sales improved by +3.4% compared to the guided range of 0-2%. The company stated that holiday results were positive in all categories due to strong traffic, and online digital growth. Further, TGT did not experience a dip between the Thanksgiving and Christmas holidays as had been in the past. Due to these factors management increased EPS guidance for Q4 from a range between $1.05-1.25 to a range of $1.30-1.40.
To add to this positive news, management commented that this upwards trend is now expected to continue through 2018 as they increased 2018 EPS guidance as well; 2018 was previously guided between $4.64-4.74, and is now expected to be in a range of $5.15-5.45.
Management also stated that its efforts in the digital realm have remained strong as digital channel sales are expected to grow by more than +25% in Q4 17 marking the fourth consecutive year of above +25% digital sales growth.
The company currently plans on opening 30 small format stores in FY 2018, and will be remodel 325 stores during the year as well.
As you can see in the two tables below, the increased guidance and better than expected holiday sales resulted positive estimate revisions. In the Agreement table, you can see that all coverage analysts increased their future earnings estimates. In the Magnitude table, you can see the extent of the upgrades in dollar form.