Illinois Tool Works (NYSE:ITW) versus Kadant (NYSE:KAI) Head to Head Contrast

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

Analyst Recommendations

This is a breakdown of recent ratings for Illinois Tool Works and Kadant, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Illinois Tool Works	5	7	2	0	1.79
Kadant	0	2	1	0	2.33

Illinois Tool Works currently has a consensus price target of $261.08, indicating a potential upside of 0.65%. Kadant has a consensus price target of $340.00, indicating a potential upside of 3.27%. Given Kadant’s stronger consensus rating and higher possible upside, analysts plainly believe Kadant is more favorable than Illinois Tool Works.

Profitability

This table compares Illinois Tool Works and Kadant’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%
Kadant	9.96%	11.97%	7.41%

Dividends

Illinois Tool Works pays an annual dividend of $6.44 per share and has a dividend yield of 2.5%. Kadant pays an annual dividend of $1.36 per share and has a dividend yield of 0.4%. Illinois Tool Works pays out 62.5% of its earnings in the form of a dividend. Kadant pays out 15.7% 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 Kadant has raised its dividend for 12 consecutive years. Illinois Tool Works is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation & Earnings

This table compares Illinois Tool Works and Kadant”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Illinois Tool Works	$15.90 billion	4.73	$3.49 billion	$10.31	25.16
Kadant	$1.05 billion	3.68	$111.60 million	$8.65	38.06

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

Insider and Institutional Ownership

79.8% of Illinois Tool Works shares are owned by institutional investors. Comparatively, 96.1% of Kadant shares are owned by institutional investors. 0.9% of Illinois Tool Works shares are owned by insiders. Comparatively, 1.4% of Kadant shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Risk & Volatility

Illinois Tool Works has a beta of 1.15, indicating that its stock price is 15% more volatile than the S&P 500. Comparatively, Kadant has a beta of 1.25, indicating that its stock price is 25% more volatile than the S&P 500.

Summary

Illinois Tool Works beats Kadant on 10 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 Kadant

Kadant Inc. supplies technologies and engineered systems worldwide. It operates in three segments: Flow Control, Industrial Processing, and Material Handling. The Flow Control segment develops, manufactures, and markets fluid-handling systems and equipment, such as rotary joints, syphons, turbulator bars, expansion joints, and engineered steam and condensate systems; and doctoring, cleaning, and filtration systems and related consumables consisting of doctor systems and holders, doctor blades, cleaning shower and fabric-conditioning systems, forming systems and wear surfaces, and water-filtration systems. The Industrial Processing segment develops, manufactures, and markets ring and rotary debarkers, stranders, chippers, engineered knife systems, industrial automation and control, recycling and approach flow systems, and virgin pulping process equipment for use in the packaging, tissue, wood products, and alternative fuel industries. The Material Handling segment offers conveying and vibratory equipment, and baling products; and manufactures and sells biodegradable absorbent granules for carriers in agricultural, home lawn and garden, professional lawn, turf, and ornamental applications, as well as for oil and grease absorption. The company markets and sells its products, services, and systems through direct sales, independent sales agents, and distributors. The company was formerly known as Thermo Fibertek, Inc. and changed its name to Kadant Inc. in July 2001. Kadant Inc. was incorporated in 1991 and is headquartered in Westford, Massachusetts.