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4 Manufacturing Stocks to Watch

Illinois Tool Works is a diversified manufacturer of engineering products and equipment operating through 840 business units across 57 countries. The company's product lines include transportation, industrial packaging, food equipment, power systems and electronics, construction equipment, polymers and fluids and decorative surfaces. Of the analysts covering the stock, 64% rate it a buy while the remaining analysts rate it a hold. There are no sell ratings on the stock. Analysts polled by Bloomberg on average believe the stock has upside of 17.4%.

The company reported an 11% increase in revenue for the fourth quarter to $4.17 billion, beating Wall Street analysts' expectations. However, net income dipped 29.2% due to the absence of tax adjustment benefit. Excluding the benefit, Illinois estimated income from continuing operations increased 30%. For all of 2010, revenue and net income were up 14.3% and 60%, respectively. The company's annual dividend payment rose almost 19% over the past five years.

Heading into the first quarter, Illinois forecasts revenue to rise between 12% to 15% and earnings per share to come in between 81 cents and 87 cents. Fourth-quarter earnings per share stood at 79 cents. For 2011, the company expects revenue to increase between 11.5% and 14.5%.

Business acquisitions in 2011 are likely to generate $800 million to $1 billion in additional revenue. The company expects to reach almost one-third of the total $1 billion with the recent purchase of the car-care products portfolio of Royal Dutch Shell (RDS.A), the Sopus Products unit. According to a Citi Investment Research report, this division of Royal Dutch has annual sales of $300 million and the Illinois deal is scheduled to close by the end of March.

>To see these stocks in action, visit the 4 Manufacturing Stocks to Watch portfolio on Stockpickr.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.
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