Illinois Tool Works Inc. (ITW) has reported third quarter 2015 diluted earnings per share (EPS) from continuing operations of $1.39, a 9 percent increase compared to the year-ago period. Organic revenue was down 1.7 percent in the quarter as continued solid organic growth performance in its Automotive OEM, Food Equipment and Construction Products divisions was offset by deteriorating end-market trends in Welding and Test & Measurement and Electronics. In addition, the company’s ongoing product line simplification (PLS) activities reduced organic growth by 1 percentage-point.
“ITW delivered another strong quarter of margin expansion and earnings per share growth,” said E. Scott Santi, chairman and CEO. “In the quarter, ITW set new all-time records for operating margin and after-tax return on invested capital and grew EPS by 9 percent. In addition, free cash flow conversion was very strong at 126 percent. Due to ITW’s unique business model and proven track record of operational execution, the company is well-positioned to continue to deliver differentiated performance in both the current environment and over the long-term.”
Automotive OEM organic revenue growth of 5 percent outpaced flat worldwide auto builds, ITW said. Organic revenue increased 12 percent in Europe, 5 percent in North America and declined 5 percent in China.
Guidance
The company is reducing its 2015 full-year EPS guidance by 5 cents or 1 percent at the midpoint to reflect current demand levels. The updated EPS range of $5.05 to $5.15 is a year-over-year increase of 9 percent at the midpoint. Excluding the negative currency impact, full-year EPS would be up 18 percent at the midpoint. Organic revenue for the year is projected to be down 1 percent to flat, which includes the expected 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. For the fourth quarter 2015, the company is expecting EPS to be in a range of $1.15 to $1.25 and operating margin to be approximately 21 percent. Fourth quarter organic revenue is forecast to be down 1 to 2 percent, in line with current demand levels.
