Illinois Tool Works Inc. (ITW) has reported second quarter 2015 diluted earnings per share (EPS) from continuing operations of $1.30, a 7 percent increase compared to the year-ago period. Excluding the (12 cents) impact of currency translation, EPS would have been up 17 percent, the company said.
ITW said organic revenue growth was up slightly in the quarter as continued strong organic growth performance in its automotive OEM and food equipment segments along with improving demand trends in its construction products business were offset by the impact of the soft capital spending environment in its welding and test & measurement and electronics segments. In addition, the implementation of the company’s ongoing product line simplification (PLS) initiative reduced enterprise-level organic revenue growth by 1 percentage point in the quarter.
“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,” said E. Scott Santi, chairman and CEO. “Consistent with our strategy and despite the challenging near-term macro environment, we continue to focus on and invest in executing the steps necessary to position the company to deliver solid above-market organic growth. As we transition into the back-half of our current five-year Enterprise Strategy, we remain firmly on track to achieve our 2017 and beyond organic growth target of 200 basis points or more above global GDP.”
Automotive OEM segment organic revenue growth of 6 percent outpaced flat second quarter worldwide auto builds. Organic revenue increased 10 percent in Europe, 5 percent in North America and 8 percent in China. Operating margin of 24.5 percent was up 80 basis points.
ITW said it is raising its 2015 full-year EPS guidance 5 cents at the midpoint to reflect second quarter results and current exchange rates. The updated EPS range is $5.07 to $5.23, an increase of 10 percent at the $5.15 midpoint. Excluding the negative currency impact, full-year EPS would be up 18 percent at the midpoint.
Organic revenue growth for the year is projected to be approximately 1 percent, which includes 1 percentage point of impact from PLS. Operating margin is projected to exceed 21 percent, an increase of more than 100 basis points year-over-year, largely driven by Enterprise Initiatives. The company said it expects this strong margin performance to offset modestly lower revenue expectations through the balance of the year. For the third quarter 2015, the company is expecting EPS to be in a range of $1.32 to $1.40 and operating margin to be approximately 22 percent. Third quarter organic revenue is forecast to be flat to up 1 percent.
