DOW JONES NEWSWIRES 
 

Illinois Tool Works Inc.'s (ITW) second-quarter profit plunged 67% as demand dropped at the diversified manufacturer.

The company also gave a cautious third-quarter sales view as it projected earnings from continuing operations of 39 cent to 51 cents a share and revenue ranging from down 2% to up 4% from the second quarter's $3.39 billion. Analysts expected a profit of 45 cents a share and revenue of $3.53 billion, which is 4% higher than the prior quarter's sales.

The bellwether maker of products ranging from fasteners to foodservice and welding equipment has been at the front lines of the sputtering economy's toll on the industrial sector as customers sharply reduce orders.

Chairman and Chief Executive David B. Speer has said the recovery in the U.S. economy would be uneven and prolonged, with significant improvement in the housing industry not likely until 2011.

The company reported earnings of $176.6 million, or 35 cents a share, down from $528.1 million, or $1.01 a share, a year earlier. Earnings from continuing operations fell to 36 cents a share from $1.01 a share. Last month, Illinois Tool boosted its forecast by 4 cents to 29 cents to 41 cents a share, citing its decision to not sell its decorative-surfaces segment.

Revenue slid 26% to $3.39 billion. Analysts surveyed by Thomson Reuters projected $3.36 billion.

Gross margin fell to 33.7% from 35.4%.

Among Illinois Tool Works' weakest segments were power systems and electronics, where sales slid 39%.

The company, which traditionally has had a profitable food-equipment business, also has been hurt as recession-battered restaurants look for ways to conserve cash and avoid big equipment investments. Food equipment sales fell 16%.

-By Mike Barris, Dow Jones Newswires; 201-938-5658; mike.barris@dowjones.com;