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Illinois Tool Works (ITW) Q3 Earnings: Will it Disappoint?


Industrial products and equipment manufacturer Illinois Tool Works Inc. ITW is set to release third-quarter 2016 results on Oct 20, before the market opens. The Zacks Consensus Estimate is pegged at $1.49 per share.

Illinois Tool Works’ better-than-expected results in the last four quarters resulted in a positive average earnings surprise of 2.63%. The earnings surprise was highest at 4.29% in the last quarter, with reported earnings of $1.46 per share exceeding the Zacks Consensus Estimate of $1.40.

Let us see how things are shaping up for Illinois Tool Works Inc. prior to this earnings announcement.

Factors to Influence Q3 Results

Illinois Tool Works is exposed to several headwinds in the near term. This is likely to suppress its growth momentum derived from its organic and inorganic growth tactics, long-term Enterprise Strategy and sound capital allocation schemes. Among many, the prevailing uncertainties in the global economy, especially in some major developed and emerging nations, are likely to influence the company’s trade relations with them. Also, forex woes are still playing spoilsports for its international businesses.

Coming to the micro issues, a challenging demand environment in the Welding segment might impact Illinois Tool Works’ top-line results in the quarter. Also, industry rivalry and volatilities in input price & supply are major concerns for the company.

Earnings Whispers

Our proven model conclusively shows that Illinois Tool Works is likely to disappoint earnings in third quarter. The company lacks the two key ingredients for a possible earnings beat – a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold).

Zacks ESP: Illinois Tool Works has an ESP of -0.67%, with the Most Accurate Estimate of $1.48 lagging the Zacks Consensus Estimate of $1.49.

Zacks Rank: Illinois Tool Works currently has a Zacks Rank #4 (Sell).

ILL TOOL WORKS Price and EPS Surprise

ILL TOOL WORKS Price and EPS Surprise | ILL TOOL WORKS Quote

As it is, we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Stocks to Consider

Here are some companies in the machinery industry you may want to consider, as they have the right combination of elements to post an earnings beat this quarter, according to our model.

AO Smith Corp. AOS, with an Earnings ESP of +2.22% and a Zacks Rank #2.

Caterpillar Inc. CAT, with an Earnings ESP of +2.70% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stanley Black & Decker, Inc. SWK, with an Earnings ESP of +1.24% and a Zacks Rank #3.

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