I'm not entirely sure why, but I've been spending a fair bit more time lately on companies that could generally be described as industrial or manufacturing companies. Actually, the "why" is pretty simple on one level: I'm moving in the direction where I think I see value. Perhaps because of worries about energy, raw-material prices, and the future of the U.S. economy, a lot of industrial companies have interesting valuations.

Today's subject is Illinois Tool Works (NYSE:ITW), a company involved in products as varied as fasteners and tools, food packaging, adhesives, and welding equipment. And hey, these guys have a business named "SPIT" (it sells fasteners and tools to the European construction market), and you've got to like that.

It's also pretty easy to like the earnings for the third quarter. Although sales were up just 10%, and up only 4% on an organic basis, margins expanded significantly, and operating income grew by 21%. And it gets better as you go along. Net income rose 24%, and earnings per share climbed 31%. Even free cash flow has been strong on a year-to-date basis, although I calculate that figure differently than the company does in its press release.

What's interesting about the company's performance is that it is heavily exposed to the construction, automotive, and general industrial markets, which haven't been all that hot lately. Many other companies are talking about commercial construction markets improving, but I think that's still to come. Likewise, while recent sales promotions from the likes of Ford (NYSE:F) and General Motors (NYSE:GM) moved units, I wouldn't call the American or European car markets all that good right now, either.

After my last column on Illinois Tool Works, I had an unpleasant email exchange with a company functionary who didn't like my take on the company's guidance. Fear not, my readers -- I'm neither a toady nor a flack for any company. So I'll continue to give my views on the company. To that end, the margin improvements at ITW have been excellent, even if organic revenue growth has been less so. Although I'm innately skeptical of companies that rely on acquisitions for growth, I don't see any way to say that it hasn't been working very well for this company.

In any event, I'm finding some points of interest in a lot of large conglomerate-type companies. I own shares of 3M (NYSE:MMM), see positive signs at United Technologies (NYSE:UTX), and have found some potentially interesting situations in smaller industrial and manufacturing companies as well. This one, though, confounds me a bit. It looks like a "buy" on my cash flow model, but it's a bit overpriced on my earnings-based valuation model. With that in mind, Illinois Tool Works stays high up on my watch list, but I won't be pulling the trigger just yet.

For more heavy-duty commentary:

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Fool contributor Stephen Simpson owns shares of 3M. The Motley Fool has a disclosure policy.