Investors seeking opportunities in the industrial sector often evaluate companies with strong innovation and market presence. Illinois Tool Works Inc. (ITW) and Parsons Corporation (PSN) both operate within industrial machinery but serve distinct yet overlapping markets, from manufacturing to critical infrastructure. Their strategic approaches to technology and growth make them compelling candidates for comparison. In this article, I will help you determine which company offers the most attractive investment potential.
Table of contents
Companies Overview
I will begin the comparison between Illinois Tool Works Inc. and Parsons Corporation by providing an overview of these two companies and their main differences.
Illinois Tool Works Inc. Overview
Illinois Tool Works Inc. manufactures and sells industrial products and equipment globally, operating through seven segments including Automotive OEM, Food Equipment, and Welding. The company serves automotive, food equipment, construction, and industrial markets, distributing products directly and via distributors. Founded in 1912 and based in Glenview, Illinois, ITW is a major player in industrial machinery with a market cap of $74.7B and employs 44,000 people.
Parsons Corporation Overview
Parsons Corporation provides integrated solutions in defense, intelligence, and critical infrastructure markets primarily in North America and the Middle East. Its two segments, Federal Solutions and Critical Infrastructure, focus on cybersecurity, geospatial intelligence, missile defense, and infrastructure engineering services. Founded in 1944 and based in Centreville, Virginia, Parsons has a market cap of $7.5B and employs 20,000 people.
Key similarities and differences
Both companies operate in the industrial machinery sector but focus on different markets; ITW serves a broad industrial base with diversified product segments, while Parsons specializes in defense and critical infrastructure solutions. ITW has a significantly larger market cap and workforce. Parsons emphasizes technology services for defense and infrastructure, contrasting with ITW’s manufacturing and equipment sales model. Both maintain strong U.S. bases and trade on the NYSE.
Income Statement Comparison
The table below presents a side-by-side comparison of key income statement metrics for Illinois Tool Works Inc. (ITW) and Parsons Corporation (PSN) for the fiscal year 2024.
| Metric | Illinois Tool Works Inc. (ITW) | Parsons Corporation (PSN) |
|---|---|---|
| Market Cap | 74.7B | 7.47B |
| Revenue | 15.9B | 6.75B |
| EBITDA | 5.11B | 518M |
| EBIT | 4.71B | 419M |
| Net Income | 3.49B | 237.9M |
| EPS | 11.75 | 2.21 |
| Fiscal Year | 2024 | 2024 |
Income Statement Interpretations
Illinois Tool Works Inc.
Illinois Tool Works (ITW) showed a steady revenue growth of 26.44% from 2020 to 2024, though revenue slightly declined by 1.3% in 2024. Net income increased by 65.39% over the period, with a 19.51% rise in net margin in the latest year. Margins remain strong and favorable, with gross margin at 43.65% and net margin at 21.94% in 2024, reflecting solid profitability despite the recent revenue dip.
Parsons Corporation
Parsons Corporation (PSN) experienced significant revenue growth of 72.25% over the 2020-2024 period, with a robust 24.03% increase in 2024 alone. Net income more than doubled, rising 138.53% overall, supported by a favorable net margin growth of 38.48%. Gross margin stands at 20.83% with an EBIT margin of 6.21%, indicating moderate profitability but strong top-line expansion and margin improvements.
Which one has the stronger fundamentals?
Both companies exhibit favorable income statement trends with strong growth in net income and margins. ITW boasts higher profitability margins and a more stable margin profile, while PSN delivers faster revenue and net income growth with improving margins. The decision on stronger fundamentals depends on weighing ITW’s margin strength against PSN’s rapid growth and expanding profitability.
Financial Ratios Comparison
Below is a comparison of key financial ratios for Illinois Tool Works Inc. (ITW) and Parsons Corporation (PSN) based on their most recent fiscal year data for 2024.
| Ratios | Illinois Tool Works Inc. (ITW) | Parsons Corporation (PSN) |
|---|---|---|
| ROE | 105.2% | 9.7% |
| ROIC | 27.2% | 8.3% |
| P/E | 21.6 | 41.7 |
| P/B | 22.7 | 4.1 |
| Current Ratio | 1.36 | 1.29 |
| Quick Ratio | 0.99 | 1.29 |
| D/E (Debt-to-Equity) | 2.44 | 0.59 |
| Debt-to-Assets | 53.6% | 25.9% |
| Interest Coverage | 15.1 | 8.3 |
| Asset Turnover | 1.06 | 1.23 |
| Fixed Asset Turnover | 6.91 | 25.5 |
| Payout ratio | 48.6% | 0% |
| Dividend yield | 2.25% | 0% |
Interpretation of the Ratios
Illinois Tool Works Inc.
Illinois Tool Works exhibits mostly strong financial ratios with favorable net margin (21.94%), return on equity (105.16%), and return on invested capital (27.19%), indicating efficient profitability and capital use. However, its high price-to-book ratio (22.69) and debt-to-equity (2.44) raise some concerns about valuation and leverage. The company pays dividends, offering a 2.25% yield supported by consistent free cash flow coverage, suggesting sustainable shareholder returns.
Parsons Corporation
Parsons Corporation shows weaker profitability metrics with a low net margin of 3.48% and return on equity of 9.73%, which are unfavorable. Its valuation multiples like price-to-earnings (41.72) and price-to-book (4.06) also appear stretched. The company does not pay dividends, likely focusing on reinvestment and growth, while maintaining moderate leverage and favorable liquidity ratios such as a quick ratio of 1.29, reflecting reasonable financial health.
Which one has the best ratios?
Illinois Tool Works demonstrates stronger profitability and return metrics, despite some concerns about leverage and valuation. Parsons Corporation has mixed results with weaker margins and returns but better liquidity and lower debt levels. Both companies receive a slightly favorable global ratios opinion, yet Illinois Tool Works generally shows a more robust financial profile overall.
Strategic Positioning
This section compares the strategic positioning of Illinois Tool Works Inc. and Parsons Corporation across market position, key segments, and exposure to technological disruption:
Illinois Tool Works Inc. (ITW)
- Leading industrial machinery firm with $74.7B market cap facing moderate competitive pressure.
- Diverse revenue streams from seven segments including automotive, food equipment, and construction products.
- Operates in traditional industrial segments with no explicit mention of technological disruption exposure.
Parsons Corporation (PSN)
- Smaller industrial player with $7.5B market cap and lower beta, indicating less market volatility.
- Focused on two segments: Federal Solutions and Critical Infrastructure, primarily serving defense and infrastructure.
- Provides advanced cybersecurity, geospatial, and missile defense solutions, indicating significant tech disruption exposure.
ITW vs PSN Positioning
ITW adopts a diversified industrial approach across multiple product segments, providing broad market exposure but facing varied competitive pressures. PSN concentrates on defense and critical infrastructure with specialized technology solutions, offering focused market penetration but narrower diversification.
Which has the best competitive advantage?
Both companies demonstrate a very favorable economic moat with growing ROIC exceeding WACC, but ITW’s larger scale and diversified segments suggest a more durable competitive advantage compared to PSN’s smaller, focused operations.
Stock Comparison
The stock prices of Illinois Tool Works Inc. (ITW) and Parsons Corporation (PSN) have shown contrasting dynamics over the past 12 months, with ITW experiencing slight bullish momentum while PSN faced a notable bearish trend.
Trend Analysis
Illinois Tool Works Inc. (ITW) exhibited a mild bullish trend over the past year with a 0.47% price increase and accelerating momentum. The stock fluctuated between 225.57 and 277.52, showing moderate volatility with a standard deviation of 10.66.
Parsons Corporation (PSN) showed a bearish trend with a -6.64% price decline and decelerating trend over the same period. The stock ranged from 58.22 to 112.69, reflecting higher volatility as indicated by a 12.98 standard deviation.
Comparing both stocks, Illinois Tool Works posted the highest market performance with a slight price gain, while Parsons Corporation experienced a significant decline and weaker recent trading dynamics.
Target Prices
The consensus target prices for Illinois Tool Works Inc. and Parsons Corporation suggest moderate upside potential based on recent analyst estimates.
| Company | Target High | Target Low | Consensus |
|---|---|---|---|
| Illinois Tool Works Inc. | 275 | 230 | 254 |
| Parsons Corporation | 107 | 70 | 85 |
Analysts expect Illinois Tool Works Inc. to trade near its current price of $255, indicating limited upside. Parsons Corporation’s consensus target is significantly above its current $69.93, suggesting potential growth opportunity.
Analyst Opinions Comparison
This section compares analysts’ ratings and grades for Illinois Tool Works Inc. (ITW) and Parsons Corporation (PSN):
Rating Comparison
ITW Rating
- Rating: B, assessed as Very Favorable overall.
- Discounted Cash Flow Score: 3, indicating a Moderate valuation outlook.
- ROE Score: 5, showing very strong efficiency in generating profit from equity.
- ROA Score: 5, highlighting very effective use of assets to generate earnings.
- Debt To Equity Score: 1, reflecting a Very Unfavorable financial risk level.
- Overall Score: 3, categorized as Moderate in financial standing.
PSN Rating
- Rating: A-, assessed as Very Favorable overall.
- Discounted Cash Flow Score: 5, indicating a Very Favorable valuation outlook.
- ROE Score: 4, reflecting favorable profit generation efficiency.
- ROA Score: 4, showing favorable asset utilization for earnings.
- Debt To Equity Score: 2, indicating a Moderate level of financial risk.
- Overall Score: 4, categorized as Favorable in financial standing.
Which one is the best rated?
Based on the provided data, PSN holds a higher overall rating (A-) and scores better in discounted cash flow, debt-to-equity, and overall financial standing. ITW excels in ROE and ROA but has a weaker debt-to-equity score, leading to a lower overall rating.
Scores Comparison
Here is the comparison of the Altman Z-Score and Piotroski Score for the two companies:
ITW Scores
- Altman Z-Score: 7.93, indicating a safe zone and low bankruptcy risk.
- Piotroski Score: 7, classified as strong financial health.
PSN Scores
- Altman Z-Score: 3.59, indicating a safe zone with low bankruptcy risk.
- Piotroski Score: 6, classified as average financial health.
Which company has the best scores?
ITW has a higher Altman Z-Score (7.93 vs. 3.59) and a stronger Piotroski Score (7 vs. 6) than PSN, indicating relatively better financial stability and strength based on the provided data.
Grades Comparison
Here is a comparison of the latest reliable grades from recognized financial institutions for both companies:
Illinois Tool Works Inc. Grades
The table below shows recent analyst grades for Illinois Tool Works Inc. from major grading companies.
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| Wells Fargo | Maintain | Underweight | 2026-01-07 |
| Goldman Sachs | Downgrade | Sell | 2025-12-16 |
| B of A Securities | Upgrade | Neutral | 2025-11-18 |
| Barclays | Maintain | Underweight | 2025-10-27 |
| Truist Securities | Maintain | Hold | 2025-10-27 |
| Wells Fargo | Maintain | Underweight | 2025-10-27 |
| Truist Securities | Maintain | Hold | 2025-10-08 |
| Barclays | Downgrade | Underweight | 2025-08-14 |
| Barclays | Maintain | Equal Weight | 2025-08-04 |
| UBS | Maintain | Neutral | 2025-07-31 |
Overall, grades for Illinois Tool Works tend to be cautious with several underweight and sell ratings, indicating a generally neutral to negative sentiment.
Parsons Corporation Grades
Below is a summary of Parsons Corporation’s recent analyst grades from reputable sources.
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| B of A Securities | Maintain | Buy | 2025-12-30 |
| Stifel | Maintain | Buy | 2025-12-23 |
| Jefferies | Maintain | Hold | 2025-12-11 |
| TD Cowen | Upgrade | Buy | 2025-12-10 |
| Baird | Maintain | Outperform | 2025-12-08 |
| Truist Securities | Maintain | Buy | 2025-12-08 |
| Keybanc | Maintain | Overweight | 2025-12-08 |
| Truist Securities | Maintain | Buy | 2025-12-05 |
| William Blair | Upgrade | Outperform | 2025-11-20 |
| Keybanc | Maintain | Overweight | 2025-10-20 |
Parsons shows a consistent pattern of buy and outperform ratings, reflecting a positive analyst consensus.
Which company has the best grades?
Parsons Corporation has received stronger and more optimistic grades than Illinois Tool Works Inc., with a clear buy consensus versus a hold consensus for Illinois Tool Works. This suggests Parsons may be viewed more favorably by analysts, potentially impacting investor sentiment and portfolio positioning.
Strengths and Weaknesses
Below is a comparison table highlighting key strengths and weaknesses of Illinois Tool Works Inc. (ITW) and Parsons Corporation (PSN) based on recent financial and strategic data.
| Criterion | Illinois Tool Works Inc. (ITW) | Parsons Corporation (PSN) |
|---|---|---|
| Diversification | Highly diversified across 7 segments, including Automotive OEM, Food Equipment, and Test & Measurement, providing stable revenue streams. | Moderate diversification with two main segments: Critical Infrastructure and Federal Solutions; less balanced revenue base. |
| Profitability | Strong profitability with a net margin of 21.94% and ROIC at 27.19%, indicating efficient capital use and value creation. | Lower profitability; net margin at 3.48%, ROIC 8.28%, showing modest returns and more limited value creation. |
| Innovation | Consistent innovation supported by growing ROIC (+62.4%), reflecting durable competitive advantage. | Also shows growing ROIC (+80.5%), suggesting improving innovation and profitability potential. |
| Global presence | Established global presence with a wide product range serving multiple industries worldwide. | More focused on U.S. government and infrastructure projects, limiting geographic and market exposure. |
| Market Share | Strong market share in industrial manufacturing sectors with stable and growing revenues across segments. | Smaller market share concentrated in specialized sectors, with less revenue stability and scale. |
Key takeaways: ITW offers a well-diversified portfolio with strong profitability and a durable competitive advantage, making it a more stable investment. PSN shows promising growth in profitability but remains more concentrated and less profitable, suggesting higher risk but potential for improvement.
Risk Analysis
Below is a comparative table presenting key risk factors for Illinois Tool Works Inc. (ITW) and Parsons Corporation (PSN) based on the latest 2024 data.
| Metric | Illinois Tool Works Inc. (ITW) | Parsons Corporation (PSN) |
|---|---|---|
| Market Risk | Beta 1.17 (moderate volatility) | Beta 0.66 (lower volatility) |
| Debt level | High debt-to-equity 2.44 (unfavorable) | Moderate debt-to-equity 0.59 (neutral) |
| Regulatory Risk | Moderate, industrial manufacturing regulations | Elevated, defense and government contracts subject to strict compliance |
| Operational Risk | Diverse industrial segments, stable operations | Complex project execution in defense and infrastructure |
| Environmental Risk | Exposure in construction and manufacturing segments | Environmental services and nuclear waste management increase risk |
| Geopolitical Risk | Limited, mostly US-based operations | High, significant international defense and infrastructure exposure |
The most impactful risks are ITW’s high leverage which could pressure financial flexibility, and PSN’s geopolitical exposure in volatile regions impacting contract stability. Both companies face regulatory scrutiny, but PSN’s defense focus adds complexity. Investors should weigh debt management at ITW against PSN’s operational and geopolitical uncertainties.
Which Stock to Choose?
Illinois Tool Works Inc. (ITW) shows a favorable income evolution with strong profitability and a growing ROIC well above its WACC, indicating value creation. Financial ratios reveal a slightly favorable profile, despite some debt-related weaknesses. Its rating is very favorable, supported by high ROE and ROA scores but penalized by leverage metrics.
Parsons Corporation (PSN) exhibits robust revenue and net income growth, with a favorable income statement overall. Its financial ratios are slightly favorable, highlighting moderate profitability and lower debt levels. PSN holds a very favorable rating with balanced scores on profitability and financial stability, although its valuation multiples appear less attractive.
For investors prioritizing durable competitive advantages and strong profitability, ITW might appear more favorable due to its very favorable moat and superior profitability metrics. Conversely, PSN could be seen as more suitable for those seeking companies with solid growth and lower leverage, despite a bearish recent price trend.
Disclaimer: Investment carries a risk of loss of initial capital. The past performance is not a reliable indicator of future results. Be sure to understand risks before making an investment decision.
Go Further
I encourage you to read the complete analyses of Illinois Tool Works Inc. and Parsons Corporation to enhance your investment decisions:
