(By Balaseshan) Illinois Tool Works Inc. (NYSE: ITW), which manufactures industrial products and equipment, reported better-than-expected third quarter earnings as operating margins improved.
EPS from continuing operations were $1.12 a share, compared with $1.00 per share in the year-ago quarter. Excluding the impact of divestiture gains in the third quarter, EPS from continuing operations totaled $1.09.
Total revenue declined 1.7 percent to $4.501 billion, due to the negative impact of currency translation and slowing demand in a variety of international end markets.
Currency translation negatively impacted revenues by 4.1 percent largely based on a weaker Euro versus last year.
Analysts, on average, polled by Thomson Reuters expected earnings of $1.06 per share on revenue of $4.58 billion for the third quarter.
Operating margins improved 130 basis points to 16.9 percent due to favorable raw material price/cost trends as well as effective management of overhead costs within the businesses.
On an organic basis, revenue increased 0.9 percent, with North American organic revenues increasing 3.9 percent and international organic revenues declining 2.7 percent. European and Asia Pacific organic revenues decreased 3.7 percent and 1.5 percent, respectively.
Looking ahead, the company believes international end markets will continue to be sluggish and the impact of currency translation will be modestly negative in the 2012 fourth quarter.
For the fourth quarter, ITW forecasts EPS from continuing operations in the range of $0.86 to $0.94 and revenue to decline in range of 1 percent to 4 percent, while analysts' expect profit of $0.98 per share on revenue growth of 1.20 percent.
For the full year 2012, the company narrowed its EPS from continuing operations forecast to range of $4.06 to $4.14 from previous estimate of $4.03 to $4.19. The company lowered revenue growth guidance to range of 0 percent to 1 percent from previous outlook of 1 percent to 3 percent. Analysts expect EPS of $4.11 on revenue growth of 2 percent.
ITW shares, which have been trading in the 52-week range between $42.41 and $62.09, closed Monday's regular trading at $60.56.