Illinois Tool Works Inc. (ITW) on Tuesday reported a 21% decline in operating revenue for the three months ended August 31, reflecting lower base revenues as well as currency translation. For the third quarter, the company raised its forecast for income from continuing operations as well as revenue growth, citing ongoing contributions from restructuring activities and improvements in discrete end markets.
For the third quarter, the Glenview, Illinois-based industrial equipment manufacturer raised its forecast for income from continuing operations to a range of $0.48-$0.56 per share from the prior range of $0.39-$0.51 per share. On average, nineteen analysts polled by Thomson Reuters expect the company to earn $0.47 per share for the quarter, with estimates ranging between $0.40 and $0.54 per share. Analysts' estimates typically exclude special items.
The company also raised its outlook for total revenue growth for the third quarter. The company now forecasts revenue growth of 3%-6% from revenues of $3.39 billion recorded in the preceding second quarter, implying revenues between $3.49 billion and 3.59 billion for the third quarter. Earlier, the company had projected revenue for the quarter to range between a decline of 2% and a growth of 4% from the second quarter.
Analysts have a consensus revenue estimate for the third quarter of $3.50 billion, representing a 15.6% decline from the same period of the prior year. In the same period a year ago, the company's earnings were $0.85 per share on revenues of $4.15 billion.
The company said that revenue decline for the three months ended August 31 consisted of a 19% decrease in base revenues and a 7% decline in contributions from currency translation. Acquisitions contributed 5% to revenues in the three month period. For the most recent three-month period, base revenues modestly improved compared to the prior three-month period largely as a result of improvements in discrete end markets such as automotive and construction.
On a segmental basis, the company's three-month moving average percentage change for operating revenues from Industrial Packaging was a decline of 31.6% from last year, while Power Systems and Electronics operating revenues fell 36.9% and Transportation revenues declined 9.2%. The three-month moving average percentage change for operating revenues from Food Equipment was down 12.4%, operating revenues for Construction Products declined 27.0%, revenues for Polymers and Fluids fell 10.3%, and revenues for Decorative Surfaces declined 19.2% from the same period last year.
In August, Illinois Tool Works had reported a 24% fall in operating revenue for the three months ended July 31. The company's base revenues for the three months dropped 21%, while contributions from currency translation declined 8%. Acquisitions contributed 5% to revenues in the three-month period. At that time, the company pointed out that base revenues for the three-month period modestly improved from the second quarter mainly due to improving end market activity for businesses in the transportation, polymers & fluids and construction segments.
While issuing the third-quarter forecast together with its financial results for the second quarter in July, the company had stated that it continues to believe that it has limited visibility as to worldwide end markets, and that it would reinstate full-year guidance when longer-term visibility becomes more reliable.
For the preceding second quarter, Illinois Tool Works, which consists of 895 business units in 54 countries and employs some 59,000 people, had posted a sharp decline in net income to $176.6 million, or $0.35 per share, from $528.1 million, or $1.01 per share, in the same period of the previous year, on 25.5% fall in revenues, as the end markets remained weak around the world. Income from continuing operations for the quarter totaled $178.9 million ,or $0.36 per share, and operating revenues were $3.39 billion.
Illinois Tool Works said previously that it expects to incur an additional $50 million to $70 million towards restructuring activities in the second half of 2009. These decentralized restructuring activities would have both short-term and long-term benefits for the company and its earnings profile in 2009 and beyond.
In Tuesday's regular trading session, ITW is trading at $43.71, down $0.49 or 1.11% on a volume of 0.35 million shares. In the past 52 weeks, the stock has been trading in a range of $25.60-$50.14.
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