Illinois Tool Works Sees Stabilizing Market Demand

Illinois Tool Works Inc.'s (ITW) second-quarter profit plunged 67%, but the company reported stabilizing demand across its diverse end markets.

Chairman and Chief Executive David Speer said the sharp decline in sales seen in earlier quarters has lessened in recent months.

"We have now seen four consecutive months of relatively stable base revenue performance," Speer said Wednesday during a conference call with Wall Street analysts. "A number of the segments have stabilized. The stability is fairly broad."

The Glenview, Ill., company operates more than 800 businesses in industry sectors that include automotive components, construction materials, electronics, food-service equipment and welding supplies. Many of ITW's businesses have been hit hard by the slowdown in the global economy and in particular the collapse of U.S. housing construction industry and auto manufacturing.

Speer said ITW is benefiting from the resumption of auto production by General Motors Co. and Chrysler following their bankruptcy reorganizations. But he warned that the recovery of ITW's business will be slow and inconsistent and stretch into 2010 and 2011.

As a result, ITW continued to refrain from providing full-year earnings guidance. And the company offered a cautious third-quarter outlook with earnings of 39 cents to 51 cents a share and revenue falling in a range from down 2% to up 4% from the second quarter's $3.39 billion. Analysts expect a profit of 45 cents a share and revenue of $3.53 billion, which is 4% higher than the second quarter's sales.

Speer said ITW's business-acquisition activity - a key driver for the company's top-line revenue in recent years - remains muted. In the second quarter, ITW purchased five companies with total revenue of $54 million. In the same quarter last year, ITW bought 10 companies with combined revenue of $308 million. Nevertheless, Speer said he's seeing early signs of a thaw in the acquisition market that could lead to more deals being completed late in the year.

ITW reported second-quarter earnings of $176.6 million, or 35 cents a share, down from $528.1 million, or $1.01 a share, a year earlier.

Last month, Illinois Tool Works said seccond-quarter earnings would be aided by its decision not to sell its laminate-surfaces business.

Revenue from the quarter slid 26% to $3.39 billion. Analysts surveyed by Thomson Reuters projected $3.36 billion. The company's weakest segments were power systems and electronics, where sales slid 39% from a year ago. ITW's stock was recently trading up 1% at $40.16 a share.

-By Bob Tita, Dow Jones Newswires; 312-750-4129; [e-mail]

(Mike Barris contributed to this report)