Moody's affirms Illinois Tool Works

Moody's Investors Service said it affirmed the Aa3 long-term senior unsecured and P-1 short-term debt ratings of Illinois Tool Works Inc. following the announcement of its second-quarter earnings.

The outlook is negative.

The agency said the company's reported results reflect the challenges of the current cyclical weakness across certain product segments and geographic regions. However, at 16.6%, Illinois Tool Works maintained its consolidated operating margin within 20 basis points of that of the prior year's second-quarter, notwithstanding the challenging demand environment and pressure on input costs.

The ratings reflect Illinois Tool Works' diversified product portfolio and geographical mix, strong and consistent profit and cash flow generation and historically conservative capital structure, Moody's said.

The negative outlook reflects Moody's view that the combination of challenging demand environments, the relatively weaker margins of recently acquired businesses and significant pressure on costs of raw materials could pressure Illinois Tool Works' free cash flow generation.

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