Goldman Sachs Downgrades Illinois Tool Works (ITW) to Sell

Goldman Sachs analyst Joe Ritchie downgraded Illinois Tool Works (NYSE: ITW) from Neutral to Sell with a price target of $230.00.

The analyst comments "ITW (Sell, $230 PT). We downgrade ITW to Sell from Neutral as we believe the company's organic/EPS growth will continue to underpace Large Cap Cyclical peers. As one of the last standing conglomerates in our sector, ITW benefited immensely a decade ago from simplifying its organizational structure, product SKUs and portfolio. The result was ~800bps of margin expansion over a 5-year period (2012-2017). Since then, organic growth has been tepid (~2%) and EPS growth (+5.5%) has been below average across our coverage. Going forward, while we are sanguine on industrial activity inflecting, across large cap cyclicals, ITW has significant consumer leverage, and we expect organic/EPS growth to continue to be below average over the next two years. We see modest downside risk to estimates and also believe the multiple is unlikely to re-rate relative to the group given the rate of EPS improvement. Our $230 12-month price target is based on a 15.0x Q5-Q8 EBITDA and implies a 5% 2027 FCF yield."

For an analyst ratings summary and ratings history on Illinois Tool Works click here. For more ratings news on Illinois Tool Works click here.

Shares of Illinois Tool Works closed at $258.66 yesterday.

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