What happened
A Wall Street analyst lowered her price target on Illinois Tool Works (ITW 0.27%), warning the difficult macroeconomic environment will likely make it tough for the manufacturing company to outperform. And investors are taking note, sending shares down more than 2% on Thursday morning.
So what
Illinois Tool Works is a manufacturer of engineered fasteners, components, and specialty equipment for a range of sectors. It is an important part of the supply chain for a number of different industries, but if those customers slow their manufacturing plans, there is little ITW can do to avoid a slowdown.
Deutsche Bank analyst Nicole Deblase warned that heading into earnings season, the outlook for stocks like Illinois Tool Works is "undeniably challenging," and there is little to suggest that the big-picture debate about whether the country is headed toward a recession will be resolved any time soon. As a result, Deblase lowered her price target on the shares to $181, from $183, and reiterated a sell rating on the shares.
Now what
Illinois Tool Works has been a market-beating stock over the past year, besting the S&P 500 by nearly 20 percentage points. But this is not the first time someone has sounded a warning.
The stock fell in late December on fears that the auto industry, which accounts for nearly 20% of ITW's sales, might be slowing. And last week, Barclays lowered its price target on the stock and reiterated an underweight rating on the shares.
Illinois Tool Works has the wherewithal to survive a slowdown, and the company has both a strong dividend and the potential to be a long-term winner. But until the uncertainty about the economy is resolved, there is unlikely to be a strong catalyst to lift the shares higher.
