Illinois Tool Works (ITW) -3.27%
Illinois Tool Works fell after the company lowered its previous first quarter earnings guidance citing “significantly weaker” demand than expected. The company now sees profit of 8 cents to 16 cents a share from continuing operations instead of its Feb. 16 forecast of 26 cents a share to 42 cents a share. According to Bloomberg, the average analyst estimate was a profit of 31 cents a share.
Illinois Tool Works said it experienced a 21 percent drop in operating revenue for the three months ended Feb. 28, reflecting a 20 percent decrease in base revenue as well as a 7 percent fall-off in contributions from currency translations. The biggest revenue weakness in the three months ended Feb. 28 was construction products (down 32 percent) and industrial packaging (down 28 percent).
Standard & Poor’s cut the company’s long-term corporate credit and senior unsecured debt ratings from A+ from AA- because of “persisting weak demand in its key industrial markets.” S&P also lowered the short-term and commercial paper ratings one level.
Goodrich (GR) +5.22%
Goodrich, the world’s largest producer of aircraft landing gear was raised to “buy” at Goldman Sachs Group noting Goodrich’s aftermarket business, which “historical analysis shows that aftermarket-exposed companies have outperformed in this part of the cycle.”
We have favorable long-term view towards the aircraft parts maker. The company derives 36 percent of revenues coming from aftermarket business, which has much higher margins than original equipment. In the near-term, the aftermarket business is especially important for Goodrich since the aerospace cycle is in a downturn, as aging planes are repaired and not replaced.
In the longer term, Goodrich is a trusted supplier of integral parts for the newest Boeing and Airbus models, which have backlogs equal to over 6 years of sales. Not only should Goodrich see a spike in original equipment sales, but they will also have a strong position in the aftermarket business for new Boeing and Airbus planes.
Arch Coal (ACI) +1.63% and Peabody Energy (BTU) +4.58%
A Barron’s article lifted sentiment for coal stocks. The article predicted that Consol Energy (CNX), the third-largest U.S. coal producer, could triple by 2010 if the global economy improves.
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Peter Lazaroff, Junior Analyst
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