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Illinois Tool Works (ITW) Downgraded To 'Market Perform' By BMO Capital

 January 30, 2013 12:41 PM

(By Balaseshan) BMO Capital Markets analyst Joel Tiss downgraded rating of Illinois Tool Works Inc. (NYSE: ITW) to "Market Perform" from "Outperform", and slightly revised its price target of the diversified industrial manufacturer to $67.

Tiss downgraded the rating of ITW shares because the shares have advanced strongly over the past year as investors have anticipated and embraced the new strategy.

However, with the stock now in the mid/low $60s, and as the analyst is trying to take a longer term view, he does not see the same sort of annual appreciation potential as he has when recommending the stock previously.

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Illinois Tool Works reported adjusted 4Q-2012 earnings per share (EPS) of $0.89, which was in line with consensus but slightly below the brokerage's estimate of $0.92.

Total revenue of $4.22 billion was slightly above expectations in the $4.15 billion range with organic revenues up 0.6%, led by Asia Pacific (up 3.7%) while North America improved 1.6% and Europe declined by 2.6%, the analyst noted.

Initial 2013 EPS guidance is a range of $4.13 to $4.37, which compares with consensus coming into the quarter of $4.38. For 1Q-2013, guidance is for EPS to be in a range of $0.91 to $0.99, which was also below consensus coming into print of $1.02, Tiss noted.

Following strong performance over the past six months (the shares have risen nearly 30% since the July low versus 20% for the S&P Industrials 1500 over the same period), the stock struggled yesterday as investors digested the latest update to ITW's Enterprise Strategy, the analyst noted.

[Related -Illinois Tool Works Inc. (ITW) Dividend Stock Analysis]

The brokerage lowered its 2013 EPS estimate to $4.10 from $4.40 and its 2014 estimate to $4.45 from $4.70.

ITW is trading down 0.23% at $63.99 on Wednesday.

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