Icahn Enterprises L.P. (IEP) versus Illinois Tool Works (ITW) Critical Analysis

Icahn Enterprises L.P. (NASDAQ: IEP) and Illinois Tool Works (NYSE:ITW) are both mid-cap multi-sector conglomerates companies, but which is the better business? We will contrast the two companies based on the strength of their institutional ownership, risk, analyst recommendations, profitability, dividends, earnings and valuation.

Insider & Institutional Ownership

96.8% of Icahn Enterprises L.P. shares are owned by institutional investors. Comparatively, 74.8% of Illinois Tool Works shares are owned by institutional investors. 90.1% of Icahn Enterprises L.P. shares are owned by company insiders. Comparatively, 0.9% of Illinois Tool Works shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Risk and Volatility

Icahn Enterprises L.P. has a beta of 1.73, indicating that its stock price is 73% more volatile than the S&P 500. Comparatively, Illinois Tool Works has a beta of 1.12, indicating that its stock price is 12% more volatile than the S&P 500.

Profitability

This table compares Icahn Enterprises L.P. and Illinois Tool Works’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Icahn Enterprises L.P. 6.35% 15.51% 4.18%
Illinois Tool Works 15.50% 46.57% 13.69%

Analyst Recommendations

This is a breakdown of current recommendations and price targets for Icahn Enterprises L.P. and Illinois Tool Works, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Icahn Enterprises L.P. 0 0 1 0 3.00
Illinois Tool Works 1 7 6 0 2.36

Icahn Enterprises L.P. presently has a consensus price target of $61.00, indicating a potential upside of 9.12%. Illinois Tool Works has a consensus price target of $151.00, indicating a potential downside of 0.42%. Given Icahn Enterprises L.P.’s stronger consensus rating and higher possible upside, equities analysts clearly believe Icahn Enterprises L.P. is more favorable than Illinois Tool Works.

Dividends

Icahn Enterprises L.P. pays an annual dividend of $3.00 per share and has a dividend yield of 5.4%. Illinois Tool Works pays an annual dividend of $3.12 per share and has a dividend yield of 2.1%. Icahn Enterprises L.P. pays out 38.2% of its earnings in the form of a dividend. Illinois Tool Works pays out 50.5% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Icahn Enterprises L.P. has raised its dividend for 53 consecutive years. Icahn Enterprises L.P. is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation & Earnings

This table compares Icahn Enterprises L.P. and Illinois Tool Works’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Icahn Enterprises L.P. N/A N/A N/A $7.85 7.12
Illinois Tool Works $13.96 billion 3.74 $3.70 billion $6.18 24.54

Illinois Tool Works has higher revenue and earnings than Icahn Enterprises L.P.. Icahn Enterprises L.P. is trading at a lower price-to-earnings ratio than Illinois Tool Works, indicating that it is currently the more affordable of the two stocks.

Summary

Icahn Enterprises L.P. beats Illinois Tool Works on 9 of the 15 factors compared between the two stocks.

Icahn Enterprises L.P. Company Profile

Icahn Enterprises L.P. (Icahn Enterprises) is a holding company. The Company’s segments include Automotive, Energy, Metals, Railcar, Gaming, Food Packaging, Mining, Real Estate and Home Fashion. The Company’s Investment segment includes various private investment funds. The Company operates its Automotive segment through its ownership in Federal-Mogul Holdings Corporation and IEH Auto Parts Holding LLC. The Company operates Energy segment through its controlling interest in CVR Energy, Inc. It operates its Metals segment through its subsidiary, PSC Metals, Inc. The Company operates its Railcar segment through its ownership interests in American Railcar Industries, Inc. Its Food Packaging segment consists of ownership in Viskase Companies, Inc. The Company’s Real Estate operations consist of rental real estate, property development and associated resorts. It also owns a limited partner interest in Icahn Enterprises Holdings L.P. (Icahn Enterprises Holdings).

Illinois Tool Works Company Profile

Illinois Tool Works Inc. is a manufacturer of industrial products and equipment. The Company operates through seven segments. The Automotive OEM segment produces components and fasteners for automotive-related applications. The Food Equipment segment offers commercial food equipment. The Test & Measurement and Electronics segment produces test and measurement, and electronic manufacturing and maintenance, repair and operations (MRO) solutions. The Welding segment produces welding equipment, consumables and accessories for industrial and commercial applications. The Polymers & Fluids segment produces adhesives, sealants, lubrication and cutting fluids, and fluids and polymers for auto aftermarket maintenance and appearance. The Construction Products segment supplies engineered fastening systems and solutions. The Specialty Products segment produces beverage packaging equipment and consumables, product coding and marking equipment and consumables, and appliance components and fasteners.

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