Head-To-Head Survey: Illinois Tool Works (NYSE:ITW) & Otis Worldwide (NYSE:OTIS)

Illinois Tool Works (NYSE:ITW) and Otis Worldwide (NYSE:OTIS) are both large-cap industrials companies, but which is the superior business? We will contrast the two businesses based on the strength of their valuation, profitability, analyst recommendations, institutional ownership, earnings, dividends and risk.

Institutional and Insider Ownership

79.8% of Illinois Tool Works shares are owned by institutional investors. Comparatively, 88.0% of Otis Worldwide shares are owned by institutional investors. 0.9% of Illinois Tool Works shares are owned by insiders. Comparatively, 0.2% of Otis Worldwide shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Volatility & Risk

Illinois Tool Works has a beta of 1.1, indicating that its stock price is 10% more volatile than the S&P 500. Comparatively, Otis Worldwide has a beta of 1, indicating that its stock price has a similar volatility profile to the S&P 500.

Dividends

Illinois Tool Works pays an annual dividend of $6.44 per share and has a dividend yield of 2.6%. Otis Worldwide pays an annual dividend of $1.68 per share and has a dividend yield of 1.8%. Illinois Tool Works pays out 62.5% of its earnings in the form of a dividend. Otis Worldwide pays out 49.6% 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 raised its dividend for 55 consecutive years and Otis Worldwide has raised its dividend for 5 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 Otis Worldwide’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Illinois Tool Works	19.05%	93.26%	19.30%
Otis Worldwide	9.41%	-30.67%	14.34%

Analyst Recommendations

This is a breakdown of current recommendations for Illinois Tool Works and Otis Worldwide, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Illinois Tool Works	4	7	2	0	1.85
Otis Worldwide	1	6	3	0	2.20

Illinois Tool Works presently has a consensus price target of $262.00, suggesting a potential upside of 7.34%. Otis Worldwide has a consensus price target of $104.88, suggesting a potential upside of 13.01%. Given Otis Worldwide’s stronger consensus rating and higher probable upside, analysts plainly believe Otis Worldwide is more favorable than Illinois Tool Works.

Valuation & Earnings

This table compares Illinois Tool Works and Otis Worldwide”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	$15.88 billion	4.46	$3.49 billion	$10.31	23.67
Otis Worldwide	$14.26 billion	2.54	$1.65 billion	$3.39	27.37

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

Summary

Illinois Tool Works beats Otis Worldwide on 11 of the 17 factors compared between the two stocks.

About Illinois Tool Works

Illinois Tool Works Inc. manufactures and sells industrial products and equipment in the United States and internationally. It operates through seven segments: Automotive OEM; Food Equipment; Test & Measurement and Electronics; Welding; Polymers & Fluids; Construction Products; and Specialty Products. The Automotive OEM segment offers plastic and metal components, fasteners, and assemblies for automobiles, light trucks, and other industrial uses. The Food Equipment segment provides warewashing, refrigeration, cooking, and food processing equipment; kitchen exhaust, ventilation, and pollution control systems; and food equipment maintenance and repair services. The Test & Measurement and Electronics segment produces and sells equipment, consumables, and related software for testing and measuring of materials and structures, as well as equipment and consumables used in the production of electronic subassemblies and microelectronics. The Welding segment produces arc welding equipment; and metal arc welding consumables and related accessories. 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 offers engineered fastening systems and solutions for the residential construction, renovation/remodel, and commercial construction markets. The Specialty Products segment provides beverage packaging equipment and consumables, product coding and marking equipment and consumables, and appliance components and fasteners. It serves the automotive OEM and tiers, MRO, commercial food equipment, construction, general industrial, industrial capital goods, consumer durables, automotive aftermarket end, and other markets. The company distributes its products directly to industrial manufacturers, as well as through independent distributors. Illinois Tool Works Inc. was founded in 1912 and is based in Glenview, Illinois.

About Otis Worldwide

Otis Worldwide Corporation engages in manufacturing, installation, and servicing of elevators and escalators in the United States, China, and internationally. The company operates in two segments, New Equipment and Service. The New Equipment segment designs, manufactures, sells, and installs a range of passenger and freight elevators, as well as escalators and moving walkways for residential and commercial buildings, and infrastructure projects. This segment serves real-estate and building developers, and general contractors. It sells its products directly to customers, as well as through agents and distributors. The Service segment performs maintenance and repair services, as well as modernization services to upgrade elevators and escalators. Otis Worldwide Corporation was founded in 1853 and is headquartered in Farmington, Connecticut.