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Illinois Tool Works

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... includes Dishwashers, Refrigerators, ovens and ... DISCOUNTED CASH FLOW. MARKET EFFICIENCY. Illinois Tool Warns, Shares Fall. COMPANY RELATED NEWS ... – PowerPoint PPT presentation

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Title: Illinois Tool Works


1
Illinois Tool Works
"A TRADITION OF EXCELLENCE"
TICKER ITW TRADED ON NYSE
2
Analyst's MONICA FERREIRA MUHAMMAD SATTAR ROSHNI
FIFADRA SHAZIA MANZAR PRATIK SHAH
3
MISSION STATEMENT
"To Provide Customers With Their Highest Levels
of Quality And Performance"
4
OUTLINE
  • 2. FREE CASH FLOWS AND COST OF EQUITY
  • FREE CASH FLOW TO EQUITY
  • DISCOUNTED CASH FLOW
  • 3. MARKET EFFICIENCY
  • SPECIFIC NEWS
  • NON-SPECIFIC NEWS
  • 1. BACKGROUND
  • ANALYSIS
  • HISTORY AND PRODUCTS
  • BORD OF DIRECTORS
  • HOLDING PERIOD RETURN (HPR)
  • FINANCIAL RATIOS

5
OUTLINE
  • RISK ANALYSIS
  • STOCK BETA
  • UNLEVERED BETA
  • COST OF EQUITY
  • COST OF CAPITAL
  • OPTIMAL CAPITAL STRUCTURE
  • WACC
  • CAPITAL STRUCUTURE
  • CONCLUSION
  • RECOMMENDATIONS

6
ITW'S HISTORY
  • ITW was founded in 1912 at Glenview, Illinois
    during WWI
  • Byron L. Smith with four men formed a company to
    manufacture and sell metal cutting tools
  • The company expanded to include truck
    transmission, pumps and other requirements for
    Americas World War I effort.
  • 1940 ITWS contribution during WWII included
    representation on the war production board and
    development of a new time saving wafer cutter to
    riffle heavy artillery barrels

7
Illinois Tool Works Board
Michael Birck Director
W James Farrell CEO
William Aldinger Director
Susan Crown Director
Robert McCormack Director
Marwin Braislford Director
Don H. Davis, Jr Director
Robert Morris Director
8
A DIFFERENTIATED
OPERATING STRATEGY
  • Decentralized, close to customer Business Model
  • 80/20 business process touches everything
  • Dedicated focus on margin improvement
  • Proven track record for integrating value-added
    acquisitions
  • Constant innovation of products and broadening of
    end markets

9
SUPER COOL FACTS
Global Presence in 6 continents and 44 countries
Imagine being on a world tour every month as a
business trip
10
Acquisitions Are Undertaken To Add Value Rather
Than Manage The Portfolio
1997 1998 1999 2000 2001 2002 2003 2004 No.
of Deals 28 36 32 45 29 21 28 24 Acquired Revenu
es 420 818 3,800 1,000 556 195 347 624
Business Units 368 412 488 592 614 603 622 650

( in millions)
Global presence in 44 countries on 6 continents
11
70 of ITWs 11.7 billion in 2004 operating
revenues came from products where it holds a
leading market position
12
ITW'S PRODUCTS AND PROCESS
  • Specialty Systems (40) machinery and
    consumables that are part of others production
    processes
  • Engineered Components (40) highly engineered
    components which are part of others products
  • Leasing and Investing Segment (20)

13
(No Transcript)
14
SPECIALTY SYSTEM SEGMENT
  • Designs and Manufactures machinery and related
    consumable that includes
  • Industrial Packaging Equipment
  • Welding Equipment Metal Consumable
  • Paper Plastic Products
  • Commercial Food Equipment, which includes
    Dishwashers, Refrigerators, ovens and specialty
    scales
  • 40 businesses in 23 countries represent 1.4
    billion of revenues

15
ENGINEERED PRODUCTS
  • Manufactures various plastic and metal components
    such as
  • Metal Plastic Fasteners
  • Components for Industrial Machines
  • Manual and Power Operating Chocking Equipment

16
Leasing Investment
  • Makes investments Primary in
  • Mortgage Entities
  • Leases of Telecommunications,
  • Aircraft, air traffic control,
  • Other Equipment and Properties

17
GROWTH RATES
WEAKNESS in growth rate percentages
18
SALES PRICE RATIO
WEAKNESS in sale price ratios
19
PROFIT MARGINS
STRENGTH in profit margins percentages
20
FINANCIAL CONDITION
STRENGTH in financial condition
21
INVESTMENT RETURN
EXCELLENT INVESTMENTS RETURNS
22
MANAGMENT EFFICIENCY
FAIR
23
FINANCIAL RATIOS CONCLUSION
Based on ITW ratios, overall, we concluded
this company has strength!
24
25 Year Revenue / Income
CAGR Revenue ----------------------- 15 EPS
----------------------------- 13 ROIC
---------------------------- 15 Shareholder
Return 20
25
HOLDING PERIOD RETURN
26
FREE CASH FLOW TO EQUITY
27
DISCOUNTED CASH FLOW
28
MARKET EFFICIENCY
COMPANY RELATED NEWS

Illinois Tool Warns, Shares Fall
Beg 83.22 End 80.24 Volume4.16 M
WEAK FORM
29
MARKET EFFICIENCY
FED RAISES RATES AGAIN
3/22 3/31 High 93.00 low 88.49
WEAK FORM
30
RISK ANALYSIS
31
COST OF CAPITAL OPTIMAL CAPITAL STRUCTURE
32
CAPITAL STRUCTURE
33
Summary of Pros N Cons
  • Positive FCFE
  • Stable and low capital structure
  • Stock Under priced
  • Strong Financials
  • Low Beta
  • Good Management
  • Unpredictable growth rates
  • Poor Price ratios

34
5 Year Price Index
35
Buy, Sell, or Hold?
36
CONCLUSION
  • Based on our analysis and analyst
    recommendations we suggest a

BUY
37
END
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