Illinois Tool Works Inc. (NYSE: ITW) stock lost 7.4% on 23 Jul, (as of 11:47 AM GMT-4; Source: Google finance) as the firm downgraded its full-year outlook citing a negative currency impact and reduced its margin guidance. ITW has reported the net income of $666 million from $587 million in the same period a year ago.
ITW in the second quarter of FY 18 has reported the adjusted earnings per share of $1.97, which is as per the analysts’ estimates for the adjusted earnings per share of $1.97 as per the FactSet consensus. The company had reported the adjusted revenue growth of 6.4 percent to $3.83 billion in the second quarter of FY 18, approximately in line with the analysts’ estimates for revenue of $3.84 billion.
Moreover, in the second quarter, excluding the second quarter 2017 legal settlement, operating income increased nine percent and operating margin expanded 50 basis points. Enterprise Initiatives has contributed 110 basis points of margin improvement, more than offsetting 70 basis points of unfavorable price/cost impact. On year-to-date on a dollar-for-dollar basis, the pricing actions generally offset the impact of raw material cost inflation. All the seven of the company’s business segments has posted positive year on year organic revenue growth, due to Welding with 13 percent. The organic growth of four percent was driven by five percent growth in North America.
Going Forward, the company expects third-quarter earnings per share in the range of $1.80 to $1.90, below the FactSet consensus of $1.98, and cut its full-year earnings per share outlook to $7.50 to $7.70 from $7.60 to $7.80. The company has also cut its 2018 operating margin guidance range to 24% to 25% from 25.0% to 25.5%, due to higher raw material costs.
Further, for the full year 2018, ITW expect to recover the impact of raw material cost increases through price actions on a dollar for dollar basis and as a result, expects the full year price/cost impact on the company’s earnings per share to be neutral (as it was in the first half of 2018). The company continues to expect organic growth of three to four percent, free cash flow at or above 100 percent of net income, and an effective tax rate of approximately 25 percent for the year. ITW now expects to repurchase $1.5 billion of its own shares in 2018.