Last week, you might have seen that Illinois Tool Works Inc. (NYSE:ITW) released its first-quarter result to the market. The early response was not positive, with shares down 3.8% to US$242 in the past week. Revenues were US$4.0b, approximately in line with expectations, although statutory earnings per share (EPS) performed substantially better. EPS of US$2.73 were also better than expected, beating analyst predictions by 16%. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the most recent consensus for Illinois Tool Works from 18 analysts is for revenues of US$16.4b in 2024. If met, it would imply a modest 2.4% increase on its revenue over the past 12 months. Statutory per share are forecast to be US$10.41, approximately in line with the last 12 months. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$16.5b and earnings per share (EPS) of US$10.15 in 2024. So the consensus seems to have become somewhat more optimistic on Illinois Tool Works' earnings potential following these results.
There's been no major changes to the consensus price target of US$253, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Illinois Tool Works analyst has a price target of US$305 per share, while the most pessimistic values it at US$212. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
Of course, another way to look at these forecasts is to place them into context against the industry itself. It's pretty clear that there is an expectation that Illinois Tool Works' revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 3.2% growth on an annualised basis. This is compared to a historical growth rate of 4.0% over the past five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 3.5% annually. So it's pretty clear that, while Illinois Tool Works' revenue growth is expected to slow, it's expected to grow roughly in line with the industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Illinois Tool Works' earnings potential next year. Happily, there were no real changes to revenue forecasts, with the business still expected to grow in line with the overall industry. The consensus price target held steady at US$253, with the latest estimates not enough to have an impact on their price targets.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Illinois Tool Works going out to 2026, and you can see them free on our platform here.
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Illinois Tool Works , and understanding it should be part of your investment process.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.