Illinois Tool Works Down 4% After Lowering Guidance

Illinois Toll Works (ITW) lowered its Q4 earnings guidance by $0.04/share to a new range of $0.82-$0.86. Guidance for the year has been lowered to a range of $3.32 to $3.36. Analysts previously estimated Q4 EPS of $0.88 and $3.38 for the full-year.

The company cited ongoing weakness in the North American market. "During the past three months, the company has seen continuing weakness in North American end markets, and as a result lower than expected base revenues and operating margins." Illinois Toll Works has suffered due to the current U.S. housing slump which has lowered demand for products related to construction. However, in the last decade the firm's U.S. dependence had dropped to 50% of sales from 65% of sales. The company also said that acquisitions were cutting into profit margins. Illinois Tool Works purchased the filtration portion of Filtertek Inc. from Esco Technologies Inc. (ESE) for $77.5 million. In October, it agreed to buy Densit from FLSmidth. The previous month, it acquired Avery Berkel, a food retail weighing unit of Avery Weigh-Tronix.

Shares were down 4% in pre-market trading to $53.50 from Friday's close of $55.90 and continues to trade around this level. At least one analyst said the news was not altogether bad. "The downward revision was modest, as the midpoint of the company's forecast full-year earnings growth range is now 11% instead of its previous 12%," Morningstar analyst John Kearney wrote. "Our 2007 projections were even more conservative than the bottom end of the company's revised earnings range."

Sources: Press release, Bloomberg, Dow Jones, Wall Street Journal, Reuters
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