Illinois Tool Works (ITW) sharply reduced their forecast of revenues and earnings for the first quarter, sending shockwaves through the market for the company’s stock.

Coming as it did just one month after the company reaffirmed its guidance for earnings in the first quarter of 26 cents to 42 cents per share, the new forecast of earnings ranging from 8 cents to 16 cents is nothing short of alarming.

It is difficult to believe that conditions could have deteriorated so quickly that the company could not have known in February that sales were in a steep decline exceeding the sharp drop in business the company had experienced the previous quarter.

The failure to recognize the trend gives cause for concern about the effectiveness of management at the company.

Illinois Tool is a multi-national manufacturer of industrial products and equipment with 65,000 people employed in the company’s 875 operations in 54 countries.

The company manufactures and sells products for industrial packaging, power systems, electronics, transportation, construction, food handling and polymers and fluids. With nearly 16 billion in sales, Illinois Tool Works is among the largest.

ITW has been on an acquisition spree over the last twelve months. The company purchased Avery Weigh-Tronics, an industrial scale manufacturing company in September of 2008; purchased the assets of Trymer, a rigid foam manufacturer in July, Quipp Inc., a manufacturer of newspaper equipment in June and V S Acquisition Holding Company, a manufacturer of equipment and software used in soldering printed circuit boards in March.

It remains to be seen if this heady buying binge can result in an integrated operation across numerous segments of equipment manufacturing.

ITW was hammered in early trading following the release of the revised outlook. The stock has recovered somewhat, and is trading at $27.40, down about 1.75% on the day.

Companies engaged in businesses similar to Illinois Tool Works, though faced with the same market conditions, are faring better in the market. Deere and Company (DE) is up 2.63%; Raytheon (RTN) is up 3.32 %; Rockwell Automation (ROK) is up 2.82%; and Ingersoll
Rand (IR) is up 1.3%.

Illinois Tool has decent financial health ratios, with a current ratio of 1.21 compared to an industry average of 4.33 and a long term debt to equity ratio of 16.23, which is slightly higher than the industry average of 14.25.

The favorable financial ratios do not, however, provide comfort to override concerns about the company’s forecasting ability and the ability to absorb the acquisitions of the last year.

This article was written by Jamie Dlugosch, contributor to InvestorPlace Media. For more actionable insights likes this, visit www.InvestorPlace.com.