Dow Jones Newswires | Moody’s Investors Service raised its
ratings outlook on Illinois Tool Works Inc., lessening the threat of a
downgrade for the bellwether maker of products ranging from fasteners
to food-service items.

The ratings agency said Illinois Tool Works’s credit metrics have stabilized “and are likely to strengthen over the near term in a more supportive micro-demand environment.” Changing the ratings outlook to stable from negative also reflects “significant improvement” in the company's liquidity after it sold $1.5 billion of long-term notes last year.

“Although ITW’s revenues and operating profits have been adversely affected by the extent of the global downturn, it continued to generate substantial levels of free cash flow during 2009,” Moody’;s said. “Combined with a halt to its share repurchases, slower pace of acquisitions and reduced levels of capital expenditures, this enabled the company to both reduce the level of its funded indebtedness and boost its cash holdings.”

The ratings service — which has Illinois Tool Works at A1, four notches below Aaa–expects the company to generate “significant” cash flow this year as commodity prices are lower and operating margins have benefited from restructuring efforts.

Illinois Tool Works in January said its fourth-quarter profit more than doubled because of tax gains as the company continued to benefit from its restructuring and saw sequential improvements in some of its segments.

Shares were down 0.6 percent to $43.65 in recent trading amid a broad market decline.