Illinois Tool Works (NYSE:ITW) and Johnson Controls International (NYSE:JCI) are both large-cap industrial products companies, but which is the better investment? We will contrast the two companies based on the strength of their earnings, profitability, dividends, analyst recommendations, valuation, risk and institutional ownership.
Analyst Ratings
This is a breakdown of current recommendations and price targets for Illinois Tool Works and Johnson Controls International, as reported by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score |
|---|
| Illinois Tool Works | 2 | 12 | 4 | 0 | 2.11 |
| Johnson Controls International | 0 | 8 | 11 | 0 | 2.58 |
Illinois Tool Works currently has a consensus target price of $197.00, indicating a potential downside of 3.18%. Johnson Controls International has a consensus target price of $44.8333, indicating a potential downside of 14.36%. Given Illinois Tool Works' higher possible upside, analysts plainly believe Illinois Tool Works is more favorable than Johnson Controls International.
Volatility & Risk
Illinois Tool Works has a beta of 1.07, meaning that its stock price is 7% more volatile than the S&P 500. Comparatively, Johnson Controls International has a beta of 1, meaning that its stock price has a similar volatility profile to the S&P 500.
Valuation & Earnings
This table compares Illinois Tool Works and Johnson Controls International's top-line revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio |
|---|
| Illinois Tool Works | $14.11 billion | 4.56 | $2.52 billion | $7.75 | 26.25 |
| Johnson Controls International | $22.32 billion | 1.70 | $631 million | $2.24 | 23.37 |
Illinois Tool Works has higher earnings, but lower revenue than Johnson Controls International. Johnson Controls International 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.
Dividends
Illinois Tool Works pays an annual dividend of $4.56 per share and has a dividend yield of 2.2%. Johnson Controls International pays an annual dividend of $1.04 per share and has a dividend yield of 2.0%. Illinois Tool Works pays out 58.8% of its earnings in the form of a dividend. Johnson Controls International pays out 46.4% 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. Illinois Tool Works has increased its dividend for 50 consecutive years and Johnson Controls International has increased its dividend for 1 consecutive years. Illinois Tool Works is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Profitability
This table compares Illinois Tool Works and Johnson Controls International's net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets |
|---|
| Illinois Tool Works | 16.77% | 80.95% | 14.37% |
| Johnson Controls International | 2.83% | 8.72% | 4.06% |
Institutional and Insider Ownership
77.4% of Illinois Tool Works shares are owned by institutional investors. Comparatively, 89.6% of Johnson Controls International shares are owned by institutional investors. 0.8% of Illinois Tool Works shares are owned by insiders. Comparatively, 0.6% of Johnson Controls International shares are owned by 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.
Summary
Illinois Tool Works beats Johnson Controls International on 11 of the 17 factors compared between the two stocks.
