By Billy Crosby
Illinois Tool Works Inc.'s (ITW) second-quarter earnings fell
47% as the diversified manufacturer sold several operations over
the past year and reported soft markets in North America.
The company lowered its full-year per-share earnings estimate to
$4.10 to $4.30 on revenue growth of 0.5% to 2.5%, from its prior
estimate for $4.15 to $4.35 and revenue growth of 2% to 4%.
For the current quarter, the company projected per-share
earnings of $1.06 to $1.16 on revenue growth of 3% to 5%. Analysts
polled by Thomson Reuters most recently expected earnings of $1.04
and a revenue decline of 5.2% to $4.27 billion.
The stock fell 3.7% to $70.97 in premarket trading. Shares are
up 21% so far this year.
Illinois Tool operates several hundred businesses in industrial
sectors that include automotive components, welding equipment,
testing and measurement devices, industrial packaging and
commercial kitchen appliances. The company has said it plans to
shrink the size of its business portfolio by about 25% in the
coming years as it abandons slow-growing markets and sheds
businesses with commodity-type product lines.
The realignment is expected to eliminate hundreds of managers
and reduce expenses for materials and services. Along those lines,
Illinois Tool launched a strategic review of its
industrial-packaging segment in February and said options could
include potential sale of spinoff of the business.
Last year, Illinois Tool sold a majority stake in its laminates
business to private-equity firm Clayton, Dubilier & Rice LLC
for about $1 billion and it completed the sale of its paint
finishings business to Graco Inc. (GGG) for $650 million.
Illinois Tool reported a profit of $465 million, or $1.03 a
share, down from $881 million, or $1.85 a share, a year earlier.
The year-earlier period included a per-share benefit of 76 cents a
share from discontinued operations. Excluding one-time items such
as a pension settlement charge, earnings were $1.08 a share.
Revenue dropped 5.5% to $4.22 billion. On an organic
basis--which typically excludes currency impacts, acquisitions and
divestitures--revenue was flat.
The company in April projected per-share earnings of $1.04 to
$1.12 on revenue growth of 2.5% to 3.5%.
Operating margin narrowed to 16.6% from 17%.
On an organic basis, North American revenue fell 1% due to
market softness in industrial packing, polymers and fluids and
welding segments. International revenue was up 1.1% amid a decline
of 1% in Europe and an increase of 14% in China.
Write to Billy Crosby at William.Crosby@dowjones.com
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