Illinois Tool Works (ITW) Earnings Report Shows Revenue and EPS Decline for Q1 2020

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ITW earnings report for first quarter 2020 has been released. The company recorded revenue of $3.2 billion in the quarter, and earnings per share of $1.77. Revenue declined 9.1% year-over-year, while EPS was down from $1.81 a year ago. 

EPS topped revised analyst estimates of $1.71 per share, which had previously been $1.85 per share, prior to the onset of COVID-19. This makes the fourth quarter in a row the company has beaten analyst estimates for earnings per share. 

Operating margins came in at 23.6% for ITW, which was flat on a year-over-year basis. The company contributed the ability to maintain margins on cost savings initiatives the company undertook during the quarter. And, free cash flow made up 98% of net income.

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ITW management assured investors its balance sheet is strong, with $1.4 billion in cash and cash equivalents, as well as an available credit line of $2.5 billion. In its earnings release, the company also pointed out the fact it has almost no short-term debt outstanding.

Illinois Tool Works CEO, E. Scott Santi, said the company was weathering the current crisis well, but that it is unclear what the future impact of COVID-19 will be on earnings. “It remains highly uncertain as to how long this global pandemic and related economic challenges will last or how quickly our customers and end markets will recover.”

Before the pandemic crisis and related market turmoil ITW reported beating earnings for 2019.

Santi said the company has planned for a range of eventual opening scenarios, and the combination of a strong balance sheet, and a diversified business model, gave the company latitude to address the current crisis. 

While Illinois Tool Works pulled 2020 guidance, speaking on the company’s prospects, Santi said, “Our strong financial position gives us the latitude to make strategic choices now to prepare for a range of recovery scenarios, and to come out the other side well-positioned to continue on our path to ITW’s full-potential performance.”

Illinois Tool Works’ stock has bounced from a low of just under $120, at the recent market bottom, to trade right at $160 today. On the year, the company is down approximately 12%, which is in line with the S&P 500. Illinois Tool Works has a PE of 20.50 and yields 2.70%, or $4.28 per share, on an annualized basis. 

Steven Adams’s personal position in Illinois Tool Works: none.

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