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Tickers in this Article: ITW
Illinois Tool Works (NYSE:ITW) announced its results for the second quarter on July 24, 2012. Illinois Tool Works manufactures a range of industrial products and equipment for the automotive, construction, electronics, food/beverage, packaging, power system, decorative surfaces, and medical industries.

Investors should care about a company's quarterly earnings because it shows the state of the business over the past 90 days and provides guidance for the following 90 days. SEE: How To Decode A Company's Earnings Reports

The Numbers: Illinois Tool Works managed to beat EPS estimates, though the company's revenues failed to top expectations. The company reported $1.85 per share versus the $1.09 per share estimate and revenues of $4.66 billion versus the $4.86 billion estimate. EPS rose 86.9% while revenue climbed 0.9% from the same period last year. Illinois Tool Works' revenue has grown during each of the past four quarters on a year-over-year basis. The company's net income for the quarter was $881 million. This is 76.8% higher than the year-ago quarter.

Management Quote: "Despite slowing in a variety of international end markets and significant currency translation headwinds, we were very pleased with our second quarter operating performance," said David B. Speer, chairman and chief executive officer. "Based on our differentiated 80/20 operational focus, our businesses produced very strong operating margin improvement in the quarter with excellent management of input and overhead costs. In addition, we continued to return significant levels of cash to our shareholders through our share repurchase program as well as our strong dividend payout."

A Look Back: Gross margins grew 1.2 percentage points to 36.3%. The growth appeared to be driven by falling costs, as they dropped 1.1% from a year earlier while revenue rose 0.9%.

Net income has increased 21.4% year-over-year on average across the last five quarters. The biggest gain came in the most recent quarter, when income climbed 76.8% from the year-earlier quarter.

Looking Ahead: Over the last 30 days, analysts have not been optimistic about the company's next-quarter performance. The average estimate for the third quarter is now $1.10 per share, down from $1.12. A decreasing earning estimate is a negative sign and usually leads to a drop in the stock price. The average estimate for the fiscal year is $4.18 per share, falling from $4.25 30 days ago.

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