ITW ignores balance sheet debt issues. Suspicious focus on sunshine earnings. Strange narrative tactic. $ITW

Illinois Tool Works

Image via Wikipedia

ITW (NYSE:ITW) came out  with glowing Q4 results. In a suspiciously dense headlines it focused on increasing revenues and margins. In fact  Chairman and Chief Executive Officer David B. Speer. said”We produced strong top line growth, solid margin improvement and impressive free operating cash flow.” He felt it was a solid performance by Team ITW.

Then take a look at the balance sheet and lets look at a few fundamentals. Overall the cash position has not changed. So they are spending. Then look at dramatic increases in short-term and long-term debt. Approximately $1.3 billion. Large increases in debt are always dangerous. Bankers will want the money repayed.

If you read the earnings release you’ll notice a tension between organic growth and overall growth. They have bought growth but are wording the press release to give the impression that margins are improving; which makes it look as if management is working very hard.

Sounds like the PR strategy is to pretend growth is not from acquisition but from diligent management which is improving constantly. This is a dangerous narrative for investors.

George Gutowski writes from a caveat emptor perspective.

$ITW confused about Euro operations. But everything else should be stable they think! Reg FD Challenges

Illinois Tool Works

Image via Wikipedia

Illinois Tool Works (NYSE:ITW) announced quarterly numbers and mashed up some headlines to make it look good. Revenues are up 10% as a result of acquisitions but organic growth is only 4%. No real word in the press release about the all important bottom line.

ITW bills itself as a company that has been around for almost 100 years. After a 100 years it’s about the bottom line. ITW you are not a high-tech fast growth eat your babies grab at the brass ring. Investors expect regular profits.

Management threw out a warm and fuzzy with this line “In November, the Company continued to see generally stable demand in a number of worldwide end markets and geographies. Europe, however, continued to be challenging.”

No break down on a geographical basis. Europe is challenging for everyone. That is not exactly a deep dive into the numbers. ITW your press release is highly inadequate when held against Reg FD. 

$ITW Sells Off Assets, Buys Back Shares, Why is This Good? #sharebuyback

Illinois Tool Works (NYSE:ITW) to use the famous investment euphemism “as previously announced” reported they sold off some assets and therefore restated earnings and EPS. OK fair enough. The press release begs more questions than it solves.

ITW, who BTW does not quote any executives, could have confirmed how much capital was being redeployed and what was ITW going to do. Silence usually means embarrassment. Debts are over $2 Billion and interest rates will start popping soon. Why not cut debt and get the monkey off your back? Or at least get a smaller monkey. Don’t give me this locked in fixed rate stuff. Companies with little or no debt are more valuable. $2 billion is a lot and will remain a lot.

The EPS hit seems substantial for the quarters restated but they cover that up with re-affirmed guidance to pacify the gullible and easily distracted. They then follow-up proudly with how many shares they have re-purchased and what the supposed positive impact will be.

The stock yields about 2.5% and the company offers nothing about fundamentals. What about a dividend increase?

This is drip drip disclosure designed to allow executives in the future to say “as we previously announced”

Disclosure: George Gutowski writes from a caveat emptor perspective. I hold no positions in stocks mentioned in this post. I have no plans to initiate new positions within the next 72 hours.

$ITW Grandiose Expectations Can It Get Better? Can It Get Worse?

Illinois Tool Works (NYSE:ITW) reported some eye-popping Q1 results. Even factoring out some one time tax events which they do point out the growth rates are stellar. So when a company catches an express ladder up do they caution you that this may not continue or do they play to market greed and urge investors to believe they are on a great ride.

Well if you communicate with investors and say we are on a great ride you need to explain why. So lets take a look at some of the quotes and watch the positioning.

David B. Speer, chairman and chief executive officer: “Our total revenue increase of 17 percent was driven by double-digit organic growth, underlying both the strength in many of our worldwide end markets and our ongoing market penetration gains. We believe that most of our end markets will remain relatively strong throughout the remainder of 2011.”

Thats it for analysis. No further comments or critical evaluation. Just hang onto your hat and hope it all works out.In the same earnings release the investor relations people added in this little clause.

“With nearly 100 years of history, Illinois Tool Works Inc. is a Fortune 200 global diversified industrial manufacturer. The Company’s value-added consumables, equipment and service businesses serve customers in developed as well as emerging markets around the globe. ITW’s key business platforms, including welding, automotive OEM, industrial packaging, food equipment, construction, polymers and fluids, test and measurement, electronics, decorative surfaces and automotive aftermarket…”

Usually broadly based companies operating in multiple products and multiple markets are able to parse and segment their operations and convince investors they are on the job everywhere. ITW does not play by the same rules.

Disclosure: “George Gutowski” operates from a “Caveat Emptor Perspective” I hold no positions in stocks mentioned in this post. I have no plans to initiate new positions within the next 72 hours.

ITW Lacks Transparency

ITW (ITW) Illinois Tool Works released summary results for the last three months ending Aug 31, 2010. The company has a habit of releasing three-month rolling numbers and placing them top of mind with the investor. This allows you to bleed in and bleed out problems in small bits without the investing public becoming aware of them. A more transparent process would be to announce monthly information on a stand alone basis. Clearly the information is available. Why not put it up on a pedestal for all to see?

The press release does not quote executives and does not even provide contact information to the investor relations department.

Disclosure: No position in stocks mentioned in this post.

ITW Talk To Me Baby

Illinois Tool Works (ITW) issued an abbreviated earnings release which I am not sure meets Reg FD standards. No income statement, balance sheet or sources and uses of cash were included. They threw in a few points about sales and revenue gains and called it an earnings release. No management discussion of anything meaningful. Ten days ago they increased the dividend by 10% citing strong free cash flow.

Talk to me baby. Say something an investor would understand. Anything for a start.

Disclosure: No position in any stocks mentioned in this post.