June 18, 2017

NYSE: ITW

ILLINOIS TOOL WORKS

BUY HOLD SELL

BUY
RATING SINCE 04/27/2011
A+ A A- B+ B B- C+ C C- D+ D D- E+ E E- F TARGET PRICE $194.53

Annual Dividend Rate Annual Dividend Yield Beta Market Capitalization 52-Week Range Price as of 6/15/2017
$2.60 1.75% 1.06 $51.2 Billion $98.32-$148.23 $148.21

Sector: Industrials Sub-Industry: Industrial Machinery Source: S&P

Weekly Price: (US$) SMA (50) SMA (100) 1 Year 2 Years
ITW BUSINESS DESCRIPTION
Illinois Tool Works Inc. manufactures and sells 200
TARGET
TARGET
TARGETPRICE
TARGET PRICE
PRICE$194.53
$194.53
$194.53
industrial products and equipment worldwide. It
operates through seven segments: Automotive 180
OEM; Test & Measurement and Electronics; Food
Equipment; Polymers & Fluids; Welding; 160
Construction Products; and Specialty Products.
140
STOCK PERFORMANCE (%)
3 Mo. 1 Yr. 3 Yr (Ann) 120
Price Change 9.41 40.91 18.89
100
GROWTH (%)
Last Qtr 12 Mo. 3 Yr CAGR 80
Revenues 6.01 3.44 -1.15 Rating History
Net Income 14.52 10.16 5.36 BUY
EPS 19.37 14.20 16.63
Volume in Millions
20
RETURN ON EQUITY (%)
ITW Ind Avg S&P 500 10
Q1 2017 46.80 20.79 12.81
Q1 2016 36.58 19.24 11.95 0
2016 2017
Q1 2015 38.56 23.49 14.20 COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History

P/E COMPARISON RECOMMENDATION

We rate ILLINOIS TOOL WORKS (ITW) a BUY. This is based on the convergence of positive investment
measures, which should help this stock outperform the majority of stocks that we rate. The company's
strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, expanding
profit margins, solid stock price performance and growth in earnings per share. We feel its strengths
outweigh the fact that the company shows weak operating cash flow.

HIGHLIGHTS
ITW's revenue growth has slightly outpaced the industry average of 5.1%. Since the same quarter one year
24.91 28.15 25.73 prior, revenues slightly increased by 6.0%. Growth in the company's revenue appears to have helped boost
the earnings per share.
ITW Ind Avg S&P 500
Investors have apparently begun to recognize positive factors similar to those we have mentioned in this
EPS ANALYSIS ($) report, including earnings growth. This has helped drive up the company's shares by a sharp 40.91% over the
past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although
almost any stock can fall in a broad market decline, ITW should continue to move higher despite the fact that
it has already enjoyed a very nice gain in the past year.

ILLINOIS TOOL WORKS has improved earnings per share by 19.4% in the most recent quarter compared to the
same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth
over the past two years. We feel that this trend should continue. During the past fiscal year, ILLINOIS TOOL
Q1 1.21
Q2 1.30
Q3 1.39
Q4 1.23

Q1 1.29
Q2 1.46
Q3 1.50
Q4 1.45

Q1 1.54

WORKS increased its bottom line by earning $5.70 versus $5.13 in the prior year. This year, the market expects
an improvement in earnings ($6.35 versus $5.70).
2015 2016 2017
NA = not available NM = not meaningful
The company's current return on equity greatly increased when compared to its ROE from the same quarter
one year prior. This is a signal of significant strength within the corporation. Compared to other companies in
1 Compustat fiscal year convention is used for all fundamental
data items. the Machinery industry and the overall market, ILLINOIS TOOL WORKS's return on equity significantly
exceeds that of both the industry average and the S&P 500.

44.02% is the gross profit margin for ILLINOIS TOOL WORKS which we consider to be strong. It has increased
from the same quarter the previous year. Along with this, the net profit margin of 15.44% is above that of the
industry average.

This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy Report Date: June 18, 2017 PAGE 1
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2016. All rights reserved.
 June 18, 2017
NYSE: ITW

ILLINOIS TOOL WORKS

Sector: Industrials Industrial Machinery Source: S&P
Annual Dividend Rate Annual Dividend Yield Beta Market Capitalization 52-Week Range Price as of 6/15/2017
$2.60 1.75% 1.06 $51.2 Billion $98.32-$148.23 $148.21

PEER GROUP ANALYSIS INDUSTRY ANALYSIS

REVENUE GROWTH AND EBITDA MARGIN*
The Machinery industry continues to experience consolidation, globalization, and cost containment with the
biggest companies expected to continue to dominate and generate the most revenue.
18%

MIDD
FA

The challenges the industry faces include the surges in commodity costs, which lowers margins. The result of
VO

these commodity increases have been higher prices, which customers have generally seemed to absorb as
RA

PNR
BL

surcharges have helped cover the difference, though there is no guarantee this will continue. Steel and
E

NDSN copper in particular saw the highest increase in prices.

XYL Manufactures have been moving to lower cost areas for production in order to contain costs. This allows the
IEX company to achieve better margins and improve competitiveness. Additionally, another positive along with
Revenue Growth (TTM)

this is that it allows the company to be closer to the emerging demand base and thus its new customers.
SNA
The three main segments of the machinery industry are flow control equipment, electrical equipment and
UN

SWK
FA

IR DOV ITW industrial automation. The need for products from these groups is driven on a macro-level to a certain
VO

degree, which depends on the strength of the world economy as well as government funding. Geographically,
RA
-2%

the outlook for the industry remains positive in North America, Latin America, and Asia, with a neutral
LE

PH
10%
EBITDA Margin (TTM)
Companies with higher EBITDA margins and
revenue growth rates are outperforming companies
with lower EBITDA margins and revenue growth
rates. Companies for this scatter plot have a market
capitalization between $6.8 Billion and $51.2 Billion.
Companies with NA or NM values do not appear.
*EBITDA Earnings Before Interest, Taxes, Depreciation and
Amortization.
REVENUE GROWTH AND EARNINGS YIELD
18%
27.5% forecast for Europe. As with any industry that exports products, the machinery industry is helped by a weaker
U.S. dollar and less competitive as the dollar strengthens.
The machinery industry is not heavily regulated, though there has been an increased interest by the
government to raise energy efficiency of electrical equipment. Along with improved efficiency, the products
that will likely continue to support growth in the industry are wireless components and sensors - especially
for use in detecting biological or chemical factors. Pump and valve technology will always be in demand in
order to fulfill the ongoing need for the treatment of drinkable water and wastewater treatment. Finally,
robotics orders have rebounded after suffering from the downturn in the automotive market.
The key players in the industry include Caterpillar (CAT), Deere (DE), Illinois Tool Works (ITW), Cummins
(CMI), Flowserve (FLS), and Ingersoll-Rand (IR).

MIDD
PEER GROUP: Machinery
FA

Recent Market Price/ Net Sales Net Income

VO
RA

Ticker Company Name Price ($) Cap ($M) Earnings TTM ($M) TTM ($M)
PNR
BL
E

ITW ILLINOIS TOOL WORKS 148.21 51,199 24.91 13,796.00 2,103.00

NDSN XYL XYLEM INC 53.96 9,697 38.82 3,995.00 250.00
XYL SNA SNAP-ON INC 156.16 9,049 16.54 3,775.20 559.70
IEX IEX IDEX CORP 113.02 8,624 31.05 2,164.02 278.88
Revenue Growth (TTM)

MIDD MIDDLEBY CORP 131.91 7,589 25.08 2,281.79 300.38

SNA NDSN NORDSON CORP 117.72 6,785 24.84 1,902.79 274.59
UN

ITW SWK IR INGERSOLL-RAND PLC 89.86 23,006 16.34 13,615.40 1,440.90

FA

IR
VO

DOV SWK STANLEY BLACK & DECKER INC 140.96 21,573 18.03 11,540.40 1,169.00
RA
-2%

PH PARKER-HANNIFIN CORP 159.36 21,224 23.26 11,490.22 931.90

LE

PH
2.5% 6.5% DOV DOVER CORP 82.38 12,824 22.20 6,985.44 581.78
Earnings Yield (TTM) PNR PENTAIR PLC 66.35 12,092 27.53 4,883.50 502.60
Companies that exhibit both a high earnings yield The peer group comparison is based on Major Industrial Machinery companies of comparable size.
and high revenue growth are generally more
attractive than companies with low revenue growth
and low earnings yield. Companies for this scatter
plot have revenue growth rates between -0.5% and
17.8%. Companies with NA or NM values do not
appear.

This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy Report Date: June 18, 2017 PAGE 2
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2016. All rights reserved.
 June 18, 2017
NYSE: ITW

ILLINOIS TOOL WORKS

Sector: Industrials Industrial Machinery Source: S&P
Annual Dividend Rate Annual Dividend Yield Beta Market Capitalization 52-Week Range Price as of 6/15/2017
$2.60 1.75% 1.06 $51.2 Billion $98.32-$148.23 $148.21

COMPANY DESCRIPTION STOCK-AT-A-GLANCE

Illinois Tool Works Inc. manufactures and sells industrial Below is a summary of the major fundamental and technical factors we consider when determining our
products and equipment worldwide. It operates through overall recommendation of ITW shares. It is provided in order to give you a deeper understanding of our
seven segments: Automotive OEM; Test & Measurement rating methodology as well as to paint a more complete picture of a stock's strengths and weaknesses. It is
and Electronics; Food Equipment; Polymers & Fluids; important to note, however, that these factors only tell part of the story. To gain an even more comprehensive
Welding; Construction Products; and Specialty Products. understanding of our stance on the stock, these factors must be assessed in combination with the stocks
The Automotive OEM segment produces plastic and valuation. Please refer to our Valuation section on page 5 for further information.
metal components, fasteners, and assemblies for
automotive-related applications. The Test & FACTOR SCORE
Measurement and Electronics segment provides
equipment, consumables, and related software for Growth out of 5 stars 3.5
testing and measuring of materials and structures. This Measures the growth of both the company's income statement and weak strong
segment also offers equipment and consumables used in cash flow. On this factor, ITW has a growth score better than 60% of the
the production of electronic subassemblies and stocks we rate.
microelectronics. The Food Equipment segment provides
commercial food processing, warewashing, cooking, and
refrigeration equipment; and kitchen exhaust, ventilation,
Total Return out of 5 stars 5.0
and pollution control systems, as well as related Measures the historical price movement of the stock. The stock weak strong
services. The Polymers & Fluids segment produces performance of this company has beaten 90% of the companies we
adhesives, sealants, lubrication and cutting fluids, and cover.
fluids and polymers for auto aftermarket maintenance
and appearance. The Welding segment produces arc Efficiency out of 5 stars 5.0
welding equipment, consumables, and accessories; and Measures the strength and historic growth of a company's return on weak strong
metal jacketing and other insulation products for various invested capital. The company has generated more income per dollar of
industrial and commercial applications. The Construction capital than 90% of the companies we review.
Products segment produces engineered fastening
systems and solutions. The Specialty Products segment
provides beverage packaging equipment and
Price volatility out of 5 stars 5.0
consumables, product coding and marking equipment Measures the volatility of the company's stock price historically. The weak strong
and consumables, and appliance components and stock is less volatile than 90% of the stocks we monitor.
fasteners. The company distributes its products directly
to industrial manufacturers, as well as through Solvency out of 5 stars 4.5
independent distributors. Illinois Tool Works Inc. was Measures the solvency of the company based on several ratios. The weak strong
founded in 1912 and is headquartered in Glenview, company is more solvent than 80% of the companies we analyze.
Illinois.
Income out of 5 stars 3.5
ILLINOIS TOOL WORKS
Measures dividend yield and payouts to shareholders. The company's weak strong
155 Harlem Avenue
dividend is higher than 60% of the companies we track.
Glenview, IL 60025
USA
Phone: 224-661-8870 THESTREET RATINGS RESEARCH METHODOLOGY
http://www.itw.com
TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both
price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to
perform against a general benchmark of the equities market and interest rates. While our model is
quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include
expected equities market returns, future interest rates, implied industry outlook and forecasted company
earnings. Objective elements include volatility of past operating revenues, financial strength, and company
cash flows.

Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown
as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of
acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings
growth; and the financial strength of the underlying company as compared to its stock's valuation as
compared to projected earnings growth; and the financial strength of the underlying company as compared
to its stock's performance. These and many more derived observations are then combined, ranked, weighted,
and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of
selecting stocks.

This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy Report Date: June 18, 2017 PAGE 3
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2016. All rights reserved.
 June 18, 2017
NYSE: ITW

ILLINOIS TOOL WORKS

Sector: Industrials Industrial Machinery Source: S&P
Annual Dividend Rate Annual Dividend Yield Beta Market Capitalization 52-Week Range Price as of 6/15/2017
$2.60 1.75% 1.06 $51.2 Billion $98.32-$148.23 $148.21

Consensus EPS Estimates ($) FINANCIAL ANALYSIS

IBES consensus estimates are provided by Thomson Financial
ILLINOIS TOOL WORKS's gross profit margin for the first quarter of its fiscal year 2017 is essentially
unchanged when compared to the same period a year ago. Sales and net income have grown, and although
the growth in revenues has outpaced the average competitor within the industry, the net income growth has
not. ILLINOIS TOOL WORKS has strong liquidity. Currently, the Quick Ratio is 1.75 which shows the ability to
cover short-term cash needs. The company's liquidity has decreased from the same period last year,
indicating deteriorating cash flow.

During the same period, stockholders' equity ("net worth") has decreased by 13.89% from the same quarter
1.63 6.35 E 7.00 E last year. The key liquidity measurements indicate that the company is unlikely to face financial difficulties in
Q2 FY17 2017(E) 2018(E) the near future.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the
INCOME STATEMENT next 12-months. To learn more visit www.TheStreetRatings.com.
Q1 FY17 Q1 FY16
Net Sales ($mil) 3,471.00 3,274.00
EBITDA ($mil) 923.00 839.00
EBIT ($mil) 809.00 722.00
Net Income ($mil) 536.00 468.00

BALANCE SHEET
Q1 FY17 Q1 FY16
Cash & Equiv. ($mil) 2,493.00 2,448.00
Total Assets ($mil) 15,529.00 15,437.00
Total Debt ($mil) 7,876.00 7,003.00
Equity ($mil) 4,493.00 5,218.00

PROFITABILITY
Q1 FY17 Q1 FY16
Gross Profit Margin 44.02% 43.86%
EBITDA Margin 26.59% 25.62%
Operating Margin 23.31% 22.05%
Sales Turnover 0.89 0.86
Return on Assets 13.54% 12.36%
Return on Equity 46.80% 36.58%

DEBT
Q1 FY17 Q1 FY16
Current Ratio 2.24 2.30
Debt/Capital 0.64 0.57
Interest Expense 64.00 58.00
Interest Coverage 12.64 12.45

SHARE DATA
Q1 FY17 Q1 FY16
Shares outstanding (mil) 345 359
Div / share 0.65 0.55
EPS 1.54 1.29
Book value / share 13.01 14.52
Institutional Own % NA NA
Avg Daily Volume 1,278,664 1,244,646
2 Sum of quarterly figures may not match annual estimates due to
use of median consensus estimates.

This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy Report Date: June 18, 2017 PAGE 4
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2016. All rights reserved.
 June 18, 2017
NYSE: ITW

ILLINOIS TOOL WORKS

Sector: Industrials Industrial Machinery Source: S&P
Annual Dividend Rate Annual Dividend Yield Beta Market Capitalization 52-Week Range Price as of 6/15/2017
$2.60 1.75% 1.06 $51.2 Billion $98.32-$148.23 $148.21

RATINGS HISTORY VALUATION

Our rating for ILLINOIS TOOL WORKS has not
changed since 4/27/2011. As of 6/15/2017, the stock
was trading at a price of $148.21 which is .0% below
its 52-week high of $148.23 and 50.7% above its
52-week low of $98.32.
BUY. ILLINOIS TOOL WORKS's P/E ratio indicates a discount compared to an average of 28.15 for the
Machinery industry and a value on par with the S&P 500 average of 25.73. For additional comparison, its
price-to-book ratio of 11.40 indicates a significant premium versus the S&P 500 average of 3.08 and a
significant premium versus the industry average of 5.05. The price-to-sales ratio is well above both the S&P
500 average and the industry average, indicating a premium.

2 Year Chart
$150 Price/Earnings 1 2 3 4 5 Price/CashFlow 1 2 3 4 5
BUY: $92.63

premium discount premium discount

ITW 24.91 Peers 28.15 ITW 22.31 Peers 16.32
$125 Discount. A lower P/E ratio than its peers can Premium. The P/CF ratio, a stocks price divided by
signify a less expensive stock or lower growth the company's cash flow from operations, is useful
$100 expectations. for comparing companies with different capital
ITW is trading at a discount to its peers. requirements or financing structures.
ITW is trading at a significant premium to its peers.
2015 2016
Price/Projected Earnings 1 2 3 4 5 Price to Earnings/Growth 1 2 3 4 5
premium discount premium discount
ITW 21.16 Peers 22.24 ITW 2.19 Peers 1.29
MOST RECENT RATINGS CHANGES
Average. An average price-to-projected earnings Premium. The PEG ratio is the stocks P/E divided by
Date Price Action From To ratio can signify an industry neutral stock price and the consensus estimate of long-term earnings
6/15/15 $92.63 No Change Buy Buy average future growth expectations. growth. Faster growth can justify higher price
Price reflects the closing price as of the date listed, if available ITW is trading at a valuation on par with its peers. multiples.
ITW trades at a significant premium to its peers.
RATINGS DEFINITIONS & Price/Book 1 2 3 4 5 Earnings Growth 1 2 3 4 5
DISTRIBUTION OF THESTREET RATINGS premium discount lower higher
(as of 6/15/2017) ITW 11.40 Peers 5.05 ITW 14.20 Peers 23.26
Premium. A higher price-to-book ratio makes a Lower. Elevated earnings growth rates can lead to
43.91% Buy - We believe that this stock has the stock less attractive to investors seeking stocks capital appreciation and justify higher
opportunity to appreciate and produce a total return of with lower market values per dollar of equity on the price-to-earnings ratios.
more than 10% over the next 12 months. balance sheet. However, ITW is expected to significantly trail its
ITW is trading at a significant premium to its peers. peers on the basis of its earnings growth rate.
30.22% Hold - We do not believe this stock offers
conclusive evidence to warrant the purchase or sale of Price/Sales 1 2 3 4 5 Sales Growth 1 2 3 4 5
shares at this time and that its likelihood of positive total premium discount lower higher
return is roughly in balance with the risk of loss. ITW 3.71 Peers 2.08 ITW 3.44 Peers 12.41
Premium. In the absence of P/E and P/B multiples, Lower. A sales growth rate that trails the industry
25.87% Sell - We believe that this stock is likely to the price-to-sales ratio can display the value implies that a company is losing market share.
decline by more than 10% over the next 12 months, with investors are placing on each dollar of sales. ITW significantly trails its peers on the basis of
the risk involved too great to compensate for any ITW is trading at a significant premium to its sales growth
possible returns. industry.

DISCLAIMER:
TheStreet Ratings
14 Wall Street, 15th Floor The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but
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This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy Report Date: June 18, 2017 PAGE 5
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2016. All rights reserved.