By Mengjie (Jessie) Jiang

Illinois Tool Works Inc. on Wednesday reported better-than-expected fourth-quarter earnings boosted by a recent acquisition and strong organic growth.

Net income for the fourth quarter ended Dec. 31 surged 18 percent to $507 million, or $1.45 per diluted share, from $450 million, or $1.39 per share, well above the $1.37 consensus of Wall Street.

The Illinois-based industrial conglomerate generated revenues of $3.4 billion, an increase of 4 percent year over year as gains from the 2016 acquisition and organic growth were partially offset by foreign currency translation and the costs of product-line simplification.

“Throughout 2016, we continued to invest in our businesses to sustain above-market organic growth, strengthened our highly differentiated business portfolio and returned more than $2.8 billion of surplus capital to shareholders,” said Chairman and CEO E. Scott Santi, in a press release. “The fourth quarter closed out a year of record financial performance and strong execution by the ITW team.”

In the third quarter, ITW announced acquisition of ZF TRW’s Engineered Fasteners and Components business for about $450 million, which contributed a 4 percent increase to ITW’s fourth-quarter top line.

“They bought it because they want to add more content per car in their automotive business, so this gave them sort of a product extension they were not in and an opportunity to have higher content in each car,” said Karen Ubelhart, senior analyst at Bloomberg Intelligence, in an interview.

Organic revenue increased 2 percent in the quarter and was positive in five of ITW’s seven segments, with the biggest increase, 7 percent, in Automotive OEM.

For the full year, ITW revenues totaled $13.6 billion, an increase of 1 percent from $13.4 billion a year earlier. Net income climbed 7.4 percent to $2.04 billion, or $5.70 per diluted share, from $1.90 billion, or $5.13 per diluted share.

Morningstar analyst David Silver said ITW’s Enterprise Strategy is the cornerstone of its long-term performance.

ITW launched its Enterprise Strategy in 2012, which included business structure simplification, portfolio management and strategic sourcing, helping the company to maximum profitability through developing new products and reducing costs.

The economic environment may also help the further development of ITW as President Trump pledges to revive American manufacturing.

“The industry is becoming increasingly optimistic. We think that plans to reduce the corporate tax rates and plans to reduce regulations should be positive broadly to the industry,” said Silver, adding that he is uncertain about the timing and scale of benefits from any Trump infrastructure initiatives.

The company expects 2017 earnings per share to be in the range of $6 to $6.20 and the first quarter in the range of $1.39 to $1.49.

Shares of Illinois Tool Works closed at $128.57, up 1.19 percent.

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