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Illinois Tool Works

ITW is a diversified conglomerate that produces everything from soda can beverage rings to automotive seat heaters. Some of its more widely recognized brands include Zip-pak, Rain-x, Vulcan and Paslode. Its financial segment results are broken down into seven business units - Automotive OEM (23% of FY17 sales; 22% of profits), Test & Measurement and Electronics (~14% of sales, 13% profits), Food Equipment (15% of sales, 16% profits), Specialty Products (13% of sales 15% of profits), Polymer & Fluids (12% of sales and 10% of profits), Welding (11% of sales, 12% profits) and Construction Products (12% of sales, 12% profits). ITW operates in 57 countries, but the N.A. region alone accounted for ~50% of FY17 revenues followed by EMEA (29%), Asia (18%), and South America (3%). (09 Apr 2018)

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Focused

ITW: 3Q18 | International Softness

Earnings Note: 24 Oct 2018, 8:30 PM ET - Lower demand from international markets did indeed weigh on ITW in 3Q18. We maintain our Market perform on the credit for now as internal actions appear to be the focus although we could get updated thinking on that front in mid-December.

3M: 3Q18 | Event Risk Brewing?

Worth Watching: 23 Oct 2018, 9:51 PM ET - 3M (A1/AA-) had a downright ugly quarter especially when compared to other Industrial behemoths that were on the screen today including United Technologies and Caterpillar. Reported revenue sank 0.2% $8.15 bn, due primarily to currency, and cam ..

Industrials 2Q18 Review: Tariffs Tame for Now

Sector Analysis: 07 Aug 2018, 4:43 AM ET - It was a strong 2Q18 earnings season for our Industrial credits. We share the salient takeaways and touch on hot button topics such as end-market trends, tariffs and event risk.
Focused

ITW: 2Q18 | Stronger Performance, Weaker Guide

Earnings Note: 23 Jul 2018, 10:38 PM ET - ITW reported solid 2Q18 results, characterized by margin expansion and healthy organic growth, but worries of higher raw material costs and FX headwinds over the balance of the year saw management downwardly revise key guidance outlays.

US Industrials: Macro Data Points

Sector Analysis: 12 Jun 2018, 1:59 AM ET - In this report, we tied the positive tone from Industrial management teams to select economic data points.
Focused

Illinois Tool Works: EPG Conference Highlights

Worth Watching: 07 Jun 2018, 2:40 PM ET - Illinois Tool Works (A2/A+): In addition to discussing key macro takeaways from the EPG conference at the end of May and featuring more than fifteen other Industrial credits in our sector report, we highlight color specifically from ITW. Unl ..
Focused

US Industrials: EPG Conference | Macro to Micro

Sector Analysis: 29 May 2018, 4:47 AM ET - We attended the 3-day Electrical Products Group conference in FL last week, which featured a host of Industrial firms. The macro and end-market tone was distinctly positive.  In this report we highlight key takeaways on over 15 credits.

United Technologies Scenarios: United to Divided?

Company Spotlight: 16 Apr 2018, 4:15 AM ET - We see a modest multiple expansion opportunity if management does go down the break-up route and while there is also a case whereby the SpinCos could have IG ratings, we would not rule out seeing the Climate division move into HY territory.
Focused

US Cap Goods: Event Risk = Sector Underperformance

IG Note: 21 Mar 2018, 5:23 AM ET - The Capital Goods Index has been the worst performing sector on an excess return basis year-to-date. Sector returns severely lagged the Index in January with GE and UTX being notable underperformers to date.

JCI: Power Solutions in Play

IG Note: 12 Mar 2018, 9:44 PM ET - We had been flagging JCI as a credit with high event risk. Now JCI is joining other Industrials under pressure by putting Power Solutions under strategic review. We maintain our Underperform until we obtain more capital structure clarity.

Honeywell: Capital Allocation Update

IG Note: 06 Mar 2018, 8:18 PM ET - The message from HON's Investor Day last week was that capital will be allocated in a prudent manner. However, we remain guarded on the credit at current levels with a “new” CEO legacy building and there being an activist in the scene.

US Strategy: Tariffs as Repricing Event?

Strategy Analysis: 01 Mar 2018, 9:40 PM ET - The market has been building in very low odds of a trade war event, a NAFTA withdrawal, or a significant escalation of tit-for-tat trade retaliations on a broader scale.  The odds-makers just got a fresh load of input.

Section 232: The NAFTA Conundrum

Sector Analysis: 26 Feb 2018, 3:42 AM ET - Using Section 232 on Steel/Aluminum could damage supplier chains and cost structures and drive broader inflation.  A tariff gambit in such key industries could undermine the NAFTA negotiations and have immediate effects on risk pricing. 

United Technologies: Break-Up Concerns Validated

IG Note: 21 Feb 2018, 7:03 PM ET - For several years we have highlighted that there was break-up risk at United Technologies and at the Barclay’s Industrial conference, management legitimized that concern.

US Industrial 2018 Outlook: Conglomerate Conundrum

Sector Analysis: 21 Jan 2018, 9:58 PM ET - Against the backdrop of a generally favorable global demand environment, event risk is the key 2018 credit concern for the conglomerate peer group. We focus on this topic and revisit our credit recommendations for more than two dozen firms.

Dover: Risks Ratings with Spin-off Route

Worth Watching: 07 Dec 2017, 9:28 PM ET - Dover (A3/A-) placed its upstream Oil & Gas business, Wellsite under strategic review back in September and today we learned that the firm is going the spin-off route. This trend has been picking up steam across the US Industrials with recent e ..

GE: Early Innings of a Long Game

IG Note: 13 Nov 2017, 10:50 PM ET - Encouraging for bondholders was seeing the dividend cut and hearing A1/P1 ratings being a target, but at this juncture we do not take such ambitions at face value and maintain our Underperform on the credit.
Focused

ITW: 3Q17 | The Future Looks Bright

Worth Watching: 23 Oct 2017, 7:47 PM ET - ITW (A2/A+) enjoyed another set of healthy results this quarter, as a solid 3Q17 performance helped the firm start off the second half of the year on a good note. The company saw revenue improve both on a reported and organic basis, while opera ..

GE: 3Q17 | Can GE Bring Itself Back to Life?

Earnings Note: 20 Oct 2017, 11:10 PM ET - GE missed expectations by a wide margin and slashed full-year expectations. We continue to be at an Underperform on the credit until we obtain further clarity on management’s portfolio vision hopefully in a few weeks.

Dover 3Q17: The Waiting Game

Earnings Note: 19 Oct 2017, 2:58 PM ET - Dover released a solid set of third quarter results ahead of the separation of its upstream energy business, Wellsite. Until we obtain greater clarity on the company’s capital structure, we remain at an Underperform on the credit.

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