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ITW
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ITW Reports First Quarter 2025 Results

1. ITW's revenue decreased 3.4% to $3.8 billion in Q1 2025. 2. GAAP EPS was $2.38, down 2% year-over-year. 3. Operating margin of 24.8% reflects higher restructuring expenses. 4. Full-year 2025 guidance maintained amidst challenging economic conditions. 5. Projected share repurchase of $1.5 billion supports investor confidence.

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FAQ

Why Neutral?

While revenue and EPS declined, ITW met expectations and maintained guidance, indicating stability amid challenges. Previous instances, like the resilient performance during the COVID-19 pandemic, showcase ITW's adaptability.

How important is it?

ITW's earnings release reflects ongoing financial health but indicates potential weakness in growth. Maintaining guidance suggests management confidence, but the revenue decline may concern investors temporarily.

Why Short Term?

The immediate financial results may affect stock performance, especially with flat organic growth. However, the focus on long-term strategies suggests resilience that may stabilize shares after initial reactions.

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April 30, 2025 08:00 ET  | Source: Illinois Tool Works Inc. Revenue of $3.8 billion, down 3.4%; organic growth down 1.6%, flat on an equal days’ basisOperating margin of 24.8%; Enterprise Initiatives contribute 120 bpsGAAP EPS of $2.38, ahead of plan expectationsMaintaining full year 2025 guidance; ongoing pricing actions offset tariff cost impacts GLENVIEW, Ill., April 30, 2025 (GLOBE NEWSWIRE) -- Illinois Tool Works Inc. (NYSE: ITW) today reported its first quarter 2025 results and maintained guidance for full year 2025. “ITW commenced 2025 with solid execution, achieving financial results ahead of plan expectations as we continued to outperform underlying end markets,” said Christopher A. O’Herlihy, President and Chief Executive Officer. “Acknowledging the uncertain external environment, we are maintaining our full year 2025 guidance as we expect our ongoing pricing actions to offset tariff cost impacts. ITW is built to outperform in today's volatile environment. Our largely “produce where we sell” manufacturing strategy, decentralized operating culture which enables rapid “read and react” response, and diversified high-quality business portfolio all provide resilience during times of volatility and uncertainty. Our strong financial profile allows us to maintain our strategic investments and focus on driving continued progress on our long-term strategy to make above-market organic growth, fueled by Customer-back Innovation, into a core ITW strength,” O’Herlihy concluded. First Quarter 2025 Results First quarter revenue of $3.8 billion declined by 3.4 percent as organic revenue declined by 1.6 percent. On an equal days’ basis, organic revenue was essentially flat. Foreign currency translation impact reduced revenue by 1.8 percent. First quarter 2024 GAAP EPS of $2.73 and operating margin of 28.4 percent included a one-time inventory accounting change which benefited EPS by $0.29 and operating margin by 300 basis points. For comparison purposes, the following year-over-year references exclude this one-time item. GAAP EPS for the first quarter of 2025 of $2.38 declined two percent and included approximately $0.10 of headwind from higher restructuring expenses and unfavorable foreign currency translation impact. Operating margin of 24.8 percent declined 60 basis points as enterprise initiatives contributed 120 basis points, offset by higher restructuring expenses related to 80/20 Front-to-Back projects and other one-time items. Operating cash flow was $592 million, and free cash flow was $496 million with a conversion of 71 percent to net income. During the quarter, the company repurchased $375 million of its own shares. The effective tax rate was 21.7 percent which included a discrete tax benefit of $21 million related to the reversal of valuation allowances on net operating loss carryforwards. 2025 GuidanceITW is maintaining its full year 2025 GAAP EPS guidance range of $10.15 to $10.55 per share which includes on-going pricing actions that are projected to offset tariff cost impacts. The Company is projecting revenue and organic growth of zero to two percent based on current levels of demand adjusted for incremental pricing associated with tariffs and current foreign exchange rates. Operating margin is projected to be in the range of 26.5 to 27.5 percent, with enterprise initiatives contributing 100 basis points or more. Free cash flow is expected to exceed 100 percent of net income, and the company plans to repurchase approximately $1.5 billion of its own shares. The projected effective tax rate is approximately 24 percent. Non-GAAP Measures This earnings release contains certain non-GAAP financial measures. A reconciliation of these measures to the most directly comparable GAAP measures is included in the attached supplemental reconciliation schedule. The estimated guidance of free cash flow to net income conversion rate is based on assumptions that are difficult to predict, and estimated guidance for the most directly comparable GAAP measure and a reconciliation of this forward-looking estimate to its most directly comparable GAAP estimate have been omitted due to the unreasonable efforts required in connection with such a reconciliation and the lack of reliable forward-looking cash flow information. For the same reasons, the company is unable to address the potential significance of the unavailable information, which could be material to future results. Forward-looking Statements This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements may include, without limitation, statements regarding global supply chain challenges, expected impact of inflation including raw material inflation and rising interest rates, the potential impact of tariffs, the Company’s projected pricing actions, the impact of enterprise initiatives, future financial and operating performance, free cash flow and free cash flow to net income conversion rate, organic and total revenue, operating and incremental margin, price/cost impact, statements regarding diluted income per share, expected dividend payments, after-tax return on invested capital, effective tax rates, exchange rates, expected timing and amount of share repurchases, end market economic and regulatory conditions, the impact of recent or potential acquisitions and/or divestitures, and the Company’s 2025 guidance. These statements are subject to certain risks, uncertainties, assumptions, and other factors, which could cause actual results to differ materially from those anticipated. Important risks that could cause actual results to differ materially from the Company’s expectations include those that are detailed in ITW’s Form 10-K for 2024 and subsequent reports filed with the SEC. About Illinois Tool Works ITW (NYSE: ITW) is a Fortune 300 global multi-industrial manufacturing leader with revenue of $15.9 billion in 2024. The company’s seven industry-leading segments leverage the unique ITW Business Model to drive solid growth with best-in-class margins and returns in markets where highly innovative, customer-focused solutions are required. ITW’s approximately 44,000 dedicated colleagues around the world thrive in the company’s decentralized and entrepreneurial culture. www.itw.com Investor Relations & Media Contact:Erin LinnihanTel: 224.661.7431investorrelations@itw.com | mediarelations@itw.com ILLINOIS TOOL WORKS INC. and SUBSIDIARIESSTATEMENT OF INCOME (UNAUDITED)  Three Months Ended March 31,In millions except per share amounts 2025   2024 Operating Revenue$3,839  $3,973 Cost of revenue 2,161   2,145 Selling, administrative, and research and development expenses 706   676 Amortization and impairment of intangible assets 21   25 Operating Income 951   1,127 Interest expense (68)  (71)Other income (expense) 12   16 Income Before Taxes 895   1,072 Income Taxes 195   253 Net Income$700  $819     Net Income Per Share:   Basic$2.39  $2.74 Diluted$2.38  $2.73     Cash Dividends Per Share:   Paid$1.50  $1.40 Declared$1.50  $1.40     Shares of Common Stock Outstanding During the Period:   Average 293.6   298.9 Average assuming dilution 294.5   300.0  ILLINOIS TOOL WORKS INC. and SUBSIDIARIESSTATEMENT OF FINANCIAL POSITION (UNAUDITED) In millionsMarch 31, 2025 December 31, 2024Assets   Current Assets:   Cash and equivalents$873  $948 Trade receivables 3,153   2,991 Inventories 1,663   1,605 Prepaid expenses and other current assets 348   312 Total current assets 6,037   5,856     Net plant and equipment 2,085   2,036 Goodwill 4,903   4,839 Intangible assets 572   592 Deferred income taxes 440   369 Other assets 1,431   1,375  $15,468  $15,067     Liabilities and Stockholders' Equity   Current Liabilities:   Short-term debt$981  $1,555 Accounts payable 594   519 Accrued expenses 1,477   1,576 Cash dividends payable 439   441 Income taxes payable 289   217 Total current liabilities 3,780   4,308     Noncurrent Liabilities:   Long-term debt 7,282   6,308 Deferred income taxes 127   119 Other liabilities 1,037   1,015 Total noncurrent liabilities 8,446   7,442     Stockholders' Equity:   Common stock 6   6 Additional paid-in-capital 1,705   1,669 Retained earnings 29,154   28,893 Common stock held in treasury (25,746)  (25,375)Accumulated other comprehensive income (loss) (1,878)  (1,877)Noncontrolling interest 1   1 Total stockholders' equity 3,242   3,317  $15,468  $15,067  ILLINOIS TOOL WORKS INC. and SUBSIDIARIESSEGMENT DATA (UNAUDITED) Three Months Ended March 31, 2025Dollars in millionsTotal RevenueOperating IncomeOperating MarginAutomotive OEM$786 $151 19.3%Food Equipment 627  166 26.5%Test & Measurement and Electronics 652  139 21.4%Welding 472  153 32.5%Polymers & Fluids 429  114 26.5%Construction Products 443  130 29.2%Specialty Products 435  135 30.9%Intersegment (5) — —%Total Segments 3,839  988 25.7%Unallocated —  (37)—%Total Company$3,839 $951 24.8% ILLINOIS TOOL WORKS INC. and SUBSIDIARIESSEGMENT DATA (UNAUDITED) Q1 2025 vs. Q1 2024 Favorable/(Unfavorable)Operating RevenueAutomotive OEMFood EquipmentTest & Measurement and ElectronicsWeldingPolymers & FluidsConstruction ProductsSpecialty ProductsTotal ITWOrganic(1.2)%1.2 %(5.4)%0.1 %1.7 %(7.4)%0.9 %(1.6)%Acquisitions/Divestitures— %— %0.1 %— %— %— %— %— %Translation(2.5)%(1.9)%(1.0)%(1.0)%(2.5)%(1.8)%(1.9)%(1.8)%Operating Revenue(3.7)%(0.7)%(6.3)%(0.9)%(0.8)%(9.2)%(1.0)%(3.4)% Q1 2025 vs. Q1 2024 Favorable/(Unfavorable)Change in Operating MarginAutomotive OEMFood EquipmentTest & Measurement and ElectronicsWeldingPolymers & FluidsConstruction ProductsSpecialty ProductsTotal ITWOperating Leverage(30) bps20 bps(150) bps—30 bps(140) bps20 bps(30) bpsChanges in Variable Margin & OH Costs60 bps20 bps40 bps(50) bps50 bps120 bps140 bps(290) bpsTotal Organic30 bps40 bps(110) bps(50) bps80 bps(20) bps160 bps(320) bpsAcquisitions/Divestitures——(30) bps————(10) bpsRestructuring/Other(80) bps10 bps(60) bps30 bps(10) bps—(40) bps(30) bpsTotal Operating Margin Change(50) bps50 bps(200) bps(20) bps70 bps(20) bps120 bps(360) bps         Total Operating Margin % *19.3%26.5%21.4%32.5%26.5%29.2%30.9%24.8%         * Includes unfavorable operating margin impact of amortization expense from acquisition-related intangible assets 20 bps 30 bps 150 bps 10 bps 150 bps 10 bps 20 bps 60 bps ** ** Amortization expense from acquisition-related intangible assets had an unfavorable impact of ($0.05) on GAAP earnings per share for the first quarter of 2025. ILLINOIS TOOL WORKS INC. and SUBSIDIARIESGAAP to NON-GAAP RECONCILIATIONS (UNAUDITED) AFTER-TAX RETURN ON AVERAGE INVESTED CAPITAL (UNAUDITED)  Three Months Ended March 31,Dollars in millions 2025   2024 Numerator:   Net Income$700  $819 Discrete tax benefit related to the first quarter 2025 (21)  — Cumulative effect of change in inventory accounting method, net of tax (1) —   (88)Interest expense, net of tax (2) 52   54 Other (income) expense, net of tax (2) (9)  (12)Operating income after taxes$722  $773     Denominator:   Invested capital:   Cash and equivalents$873  $959 Trade receivables 3,153   3,238 Inventories 1,663   1,825 Net plant and equipment 2,085   1,973 Goodwill and intangible assets 5,475   5,557 Accounts payable and accrued expenses (2,071)  (2,109)Debt (8,263)  (8,325)Other, net 327   (97)Total net assets (stockholders' equity) 3,242   3,021 Cash and equivalents (873)  (959)Debt 8,263   8,325 Total invested capital$10,632  $10,387     Average invested capital (3)$10,432  $10,249     Net income to average invested capital (4) 26.9%  32.0%After-tax return on average invested capital (4) 27.7%  30.1%  (1) Represents the cumulative effect of the change from the LIFO method of accounting to the FIFO method for certain U.S. businesses in the first quarter of 2024 ($117 million pre-tax, or $88 million after-tax). (2) Effective tax rate used for interest expense and other (income) expense for the three months ended March 31, 2025 and 2024 was 24.0% and 23.6%, respectively. (3) Average invested capital is calculated using the total invested capital balances at the start of the period and at the end of the periods presented. (4) Returns for the three months ended March 31, 2025 and 2024 were converted to an annual rate by multiplying the calculated return by 4.A reconciliation of the tax rate for the three month period ended March 31, 2025, excluding the first quarter 2025 discrete tax benefit of $21 million related to the reversal of a valuation allowance on net operating loss carryforwards, is as follows:  Three Months Ended March 31, 2025Dollars in millionsIncome Taxes Tax RateAs reported$195 21.7%Discrete tax benefit related to the first quarter 2025 21 2.3%As adjusted$216 24.0% AFTER-TAX RETURN ON AVERAGE INVESTED CAPITAL (UNAUDITED)  Twelve Months EndedDollars in millionsDecember 31, 2024Numerator: Net income$3,488 Net discrete tax benefit related to the third quarter 2024 (121)Interest expense, net of tax (1) 215 Other (income) expense, net of tax (1) (336)Operating income after taxes$3,246   Denominator: Invested capital: Cash and equivalents$948 Trade receivables 2,991 Inventories 1,605 Net plant and equipment 2,036 Goodwill and intangible assets 5,431 Accounts payable and accrued expenses (2,095)Debt (7,863)Other, net 264 Total net assets (stockholders' equity) 3,317 Cash and equivalents (948)Debt 7,863 Total invested capital$10,232   Average invested capital (2)$10,419   Net income to average invested capital 33.5%After-tax return on average invested capital 31.2%   (1) Effective tax rate used for interest expense and other (income) expense for the year ended December 31, 2024 was 23.8%. (2) Average invested capital is calculated using the total invested capital balances at the start of the period and at the end of each quarter within the period presented.A reconciliation of the 2024 effective tax rate excluding the third quarter 2024 net discrete tax benefit of $121 million, which included favorable discrete tax benefits of $107 million related to the utilization of capital loss carryforwards upon the sale of Wilsonart and $87 million related to a reorganization of the Company's intellectual property, partially offset by a $73 million discrete tax expense related to the remeasurement of unrecognized tax benefits associated with various intercompany transactions, is as follows:  Twelve Months Ended December 31, 2024Dollars in millionsIncome Taxes Tax RateAs reported$934 21.1%Net discrete tax benefit related to the third quarter 2024 121 2.7%As adjusted$1,055 23.8% FREE CASH FLOW (UNAUDITED)  Three Months Ended March 31,Dollars in millions 2025   2024 Net cash provided by operating activities$592  $589 Less: Additions to plant and equipment (96)  (95)Free cash flow$496  $494     Net income$700  $819     Net cash provided by operating activities to net income conversion rate 85%  72%Free cash flow to net income conversion rate(1) 71%  60%  (1) Excluding the impact of the cumulative effect of the change from the LIFO method of accounting to the FIFO method for certain U.S. businesses in the first quarter of 2024 ($117 million pre-tax, or $88 million after-tax), the free cash flow to net income conversion rate for the three months ended March 31, 2024 would have been 68%. ADJUSTED NET INCOME PER SHARE - DILUTED (UNAUDITED)  Three Months Ended Twelve Months Ended March 31, 2024 December 31, 2024As reported$2.73  $11.71 Cumulative effect of change in inventory accounting method, net of tax (1) (0.29)  (0.30)Impact of sale of noncontrolling interest in Wilsonart (2) —   (1.26)As adjusted$2.44  $10.15   (1) Represents the cumulative effect of the change from the LIFO method of accounting to the FIFO method for certain U.S. businesses in the first quarter of 2024 ($117 million pre-tax, or $88 million after-tax). (2) Includes the $363 million pre-tax gain on the sale of noncontrolling interest in Wilsonart and related taxes in the third quarter of 2024.

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