- Illinois Tool Works (ITW -0.9%) is initiated with a Buy rating and a $190 price target at BofA Merrill Lynch based on 24.5x 2019 P/E, implying a 2% dividend yield.
- BofA projects ITW's organic revenue growth to accelerate to 3%-5% annually vs. 2017 growth of 2.5% and flat growth in 2015-16, and says the stock's valuation has shown strong historical correlation with return on invested capital and operating margin.
- The firm also thinks tax reform could decrease ITW's rate from 29% to the low 20s, translating to an EPS increase of $0.50-$0.60.