Stock pitch for TVA Investment Challenge Portfolio at the University of Kentucky (November, 2011)

1. ILLINOIS TOOL WORKS

2. O VERVIEW
 Industrial materials  Diversified, value-added
 Decentralized operating structure
 8 reported segments
ITW (NYSE)
 Mid-cap
Recent share price $ 42.58
Market cap 21.3 B
52-week range 39.12 – 59.27
β(average) 1.07
% Held by insiders 0.69 %

3. B USINESS M ODEL
8 reported segments:

4. B USINESS M ODEL
Revenues by Segment Transportation
FY2010
Industrial packaging
20% Power systems & electronics
16%
Food equipment
6%
14% Construction products
9%
Polymers & fluids
11% 12%
12% Decorative surfaces
Other

5. E CONOMIC M OAT
 Intellectual property
 Disciplined business process implementation
 Network effect

6. M ANAGEMENT
 Average tenure of 20 years
 CEO: David Speer
 Lean management structure

7. P ROFITABILITY & E FFICIENCY
ITW HON UTX
Market cap. 21.3 B 39.7 B 66.4 B
TATO 0.98 0.90 0.95
FATO 7.85 6.90 8.65
FCF/Sales % 11.85 % 9.26 % 8.34 %
ROE 17.45 % 25.46 % 22.23 %
ROIC 13.77 % 14.30 % 14.75 %
Operating margin 14.60 % 10.14% 12.81 %
Net margin 9.96 % 6.88 % 7.76 %

8. R ATIO A NALYSIS
ITW
Market cap. 21.3 B
Forward P/E 10.6
P/B 2.1
PEG 0.8
D/E (market value) .22
Current ratio 2.02

9. VALUATION

10. Q&A