Share Price Decline Has Illinois Tool Works Looking Reasonable $ITW

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Illinois Tool Works (NYSE:ITW) is a diversified industrial company with business segments that span many sectors of the economy. Their reporting segments are food equipment, testing and measurement, welding, polymers and fluids, construction products, automotive, and specialty products. ITW's segments are fairly even in terms of revenue generation with the smallest segments coming in around 12% and the largest at 19%.

ITW FY 2021 Revenue Segments Breakdown

ITW FY 2021 Revenue Segments Breakdown (ITW FY 2021 Annual Report)

During their Q1 FY 2022 earnings release ITW showed strong results compared to FY 2021. Each reporting segment except for automotive showed organic growth of at least 11%; although margins were under pressure.

For FY 2022 management expects pretty strong results with organic growth of 7-10% and impressive free cash flow growth of 10-20%. ITW's long-term targets are for organic revenue growth between 3-5% with annual EPS growth of 7-10%.

ITW's business is customer oriented by focusing on the needs and problems of their clients first rather than an internally developed R&D process. That relationship with their clients builds a close tie between ITW and their customers which keeps bringing those clients back to ITW when they have an issue. ITW also has a wide ranging patent portfolio that saw 1,800 applications in 2021 and over 19,000 patents in total.

ITW's share price has declined 28% since reaching nearly $250 per share in January. When I last looked at ITW I came to the conclusion that the valuation was quite steep; however, the pullback appears to have opened up an opportunity for investors.

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