Illinois Tool Works Inc. (ITW) has reported third quarter 2016 diluted earnings per share (EPS) of $1.50, an 8 percent increase compared to the year-ago period. Currency translation reduced EPS by 2 cents in the quarter.
Operating margin increased 40 basis points to 23.1 percent, including 80 basis points of margin dilution from the third quarter 2016 acquisition of Engineered Fasteners & Components (EF&C). Excluding the EF&C dilution impact, third quarter operating margin was 23.9 percent. Operating income of $808 million was up 6 percent, and after-tax return on invested capital increased by 140 basis points to 23 percent. Organic revenue increased 2 percent and the company’s ongoing Product line simplification (PLS) activities reduced organic revenue growth by approximately 1 percentage point.
“The ITW team delivered another quarter of quality execution and earnings growth marked by all-time record operating income and continued strong margin expansion driven by our enterprise strategy initiatives. In addition, continued progress in executing our pivot to growth in combination with our diversified portfolio of seven highly differentiated businesses allowed us to deliver positive organic growth in the third quarter despite a macro environment that remains challenging,” said E. Scott Santi, chairman and CEO.
ITW is raising its 2016 full-year GAAP EPS guidance range to $5.56 to $5.66, a year-over-year increase of 9 percent at the mid-point. Consistent with prior guidance the full-year organic growth forecast is 1 to 2 percent and includes approximately 1 percentage point of PLS impact. Operating margin is forecast to exceed 22.5 percent.
For the fourth quarter of 2016, the company expects GAAP EPS to be in a range of $1.31 to $1.41, an increase of 11 percent at the mid-point. Organic revenue is forecast to be 0 to 2 percent, and operating margin to be approximately 21.5 percent. Guidance is based on current foreign exchange rates.