Core Insights - Illinois Tool Works Inc. (ITW) reported fourth-quarter 2025 adjusted earnings of $2.72 per share, exceeding the Zacks Consensus Estimate of $2.68, with a year-over-year increase of 7% [1] - The company's revenues for the quarter were $4.09 billion, surpassing the consensus estimate of $4.07 billion, reflecting a 4% year-over-year growth driven by favorable foreign currency translation of 2.5% [1] - For the full year 2025, ITW's net revenues reached $16 billion, marking a 0.9% increase year over year, while adjusted earnings per share decreased by 10.4% to $10.49 [2] Segment Performance - Test & Measurement and Electronics segment revenues were $789 million, up 6% year over year, exceeding the estimate of $758.6 million [3] - Automotive Original Equipment Manufacturer revenues increased 6% year over year to $827 million, slightly below the estimate of $842.5 million [3] - Food Equipment generated revenues of $698 million, up 4% year over year, surpassing the estimate of $690.5 million [4] - Welding revenues were $462 million, reflecting a 3% year-over-year increase, slightly below the estimate of $468.3 million [4] - Construction Products revenues decreased by 2% year over year to $431 million, below the estimate of $437.6 million [5] - Specialty Products revenues increased by 4% year over year to $433 million, below the estimate of $450.3 million [5] - Polymers & Fluids revenues were $457 million, up 7% year over year, exceeding the estimate of $438.7 million [5] Margin Profile - ITW's cost of sales increased by 2.8% year over year to $2.28 billion, while selling, administrative, and research and development expenses rose by 7.5% to $704 million [6] - The operating margin improved to 26.5%, up 30 basis points from the previous year, with enterprise initiatives contributing 140 basis points to this margin [6] Balance Sheet and Cash Flow - At the end of Q4 2025, ITW had cash and equivalents of $851 million, down from $948 million at the end of December 2024, while long-term debt increased to $6.68 billion from $6.31 billion [7] - The company generated net cash of $3.13 billion from operating activities in 2025, a decrease of 4.7% year over year, with capital spending on plant and equipment at $419 million, down 4.1% [8] - Free cash flow was reported at $2.71 billion, down 4.8% year over year [8] 2026 Guidance - ITW provided guidance for 2026, expecting earnings per share in the range of $11.00 to $11.40, with revenues anticipated to grow by 2-4% and organic revenues by 1-3% [9] - The operating margin is expected to remain between 26.5% and 27.5%, with enterprise initiatives projected to contribute approximately 100 basis points to the operating margin [9] - The company also plans to repurchase about $1.5 billion worth of shares and expects free cash flow to exceed 100% of its net income [11]

Financial Data and Key Metrics Changes - In Q4 2025, the company achieved revenue growth of over 4% and a 7% increase in GAAP EPS to $2.72, with organic growth of 1.3% marking the best quarterly performance of the year [3][4] - Operating income reached $1.1 billion, an increase of 5%, with segment margins at 27.7%, up 120 basis points [4][7] - Free cash flow conversion to net income was 109% for the quarter, and the company repurchased $375 million of its shares [8] Business Line Data and Key Metrics Changes - **Automotive OEM**: Revenue increased by 6%, with organic revenue up 2%. North America grew 2%, while Europe declined 1% [9] - **Food Equipment**: Revenue growth of 4% with organic growth of 1%, driven by a 3% growth in service [10] - **Test and Measurement and Electronics**: Revenue up 6% with organic revenue up 2%, showing improvement in semiconductor activity [10] - **Welding**: Revenue grew 3% with organic growth of 2%, and operating margin reached 33.3%, a 210 basis points improvement [11] - **Polymers and Fluids**: Strong top-line growth of 5% organic growth, supported by new product launches [11] - **Construction Products**: Organic growth down 4%, but margins expanded by 100 basis points to 29% [12] Market Data and Key Metrics Changes - North America grew about 2%, Asia Pacific was up 3%, while Europe declined 2% [7] - China showed strong growth in the automotive sector, with expectations of mid to high single-digit growth in 2026 [80][81] Company Strategy and Development Direction - The company aims for organic growth of 1%-3% in 2026, with a focus on customer-backed innovation (CBI) as a key growth driver [6][14] - The company plans to invest approximately $800 million in high-return internal projects to accelerate organic growth [13] - The company is open to M&A opportunities but remains selective, focusing on high-quality acquisitions that extend long-term growth potential [63][64] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the sustainability of the semiconductor market recovery and the overall improvement in demand for industrial markets [23][24] - The company expects to maintain high-quality growth with attractive incremental margins in the mid to high forties for 2026 [14][93] - Management noted that inflation in employee-related costs could offset some margin improvements, but overall margins are expected to improve [99] Other Important Information - The company achieved a 2.4% CBI-fueled revenue growth in 2025, with a goal of 3%+ by 2030 [5][6] - Patent filings increased by 9% in 2025, indicating a strong pipeline for future revenue growth [5][56] Q&A Session Summary Question: Improvement in Test and Measurement Segment - Management noted a solid quarter for Test and Measurement, with improvements in semiconductor demand and general industrial bookings [22][24] Question: Margin Expansion Across Businesses - Management expects all segments to improve operating margins in 2026, driven by enterprise initiatives and improved CBI contributions [26][28] Question: Price-Cost Dynamics - Management indicated that price-cost dynamics are expected to be slightly favorable in 2026, but not a major driver of margin improvement [35][36] Question: Seasonality Expectations - Management confirmed typical seasonality for 2026, with Q1 expected to contribute about 23% of the full year EPS [47][48] Question: CBI Contribution and Product Lifecycle Management - Management expressed confidence in achieving a higher CBI contribution in 2026, with ongoing improvements in product lifecycle management [55][57] Question: Growth in China and the U.S. - Management expects strong growth in China, particularly in the EV space, while North America is projected to show encouraging growth [76][81] Question: Sequential Revenue Growth - Management attributed the 4% sequential revenue growth in Q4 to a combination of ITW-specific factors and broader market improvements [86][95]

Financial Data and Key Metrics Changes - In Q4 2025, the company achieved revenue growth of over 4% and a 7% increase in GAAP EPS to $2.72, with organic growth of 1.3% marking the best quarterly performance of the year [3][4] - Operating income reached $1.1 billion, an increase of 5%, with segment margins at 27.7%, up 120 basis points [4][7] - Free cash flow conversion to net income was 109% for the quarter, and the tax rate was 22.8% [8] Business Line Data and Key Metrics Changes - Automotive OEM segment revenue increased by 6%, with organic revenue up 2%, while Food Equipment delivered revenue growth of 4% with organic growth of 1% [9][10] - Test and Measurement and Electronics saw revenue up 6% and organic revenue up 2%, with notable improvements in semiconductor-related businesses [10][11] - Welding revenue grew 3% with organic growth of 2%, and Polymers and Fluids had 5% organic growth, supported by new product launches [11][12] Market Data and Key Metrics Changes - North America grew about 2%, Asia Pacific was up 3%, while Europe declined by 2% [7] - China represented a significant growth opportunity, with automotive OEM business growing 5% in Q4 and 12% for the full year [81][82] Company Strategy and Development Direction - The company is focused on building above-market organic growth through Customer-Backed Innovation (CBI), achieving a 2.4% CBI-fueled revenue growth in 2025 [4][8] - The 2026 guidance includes an organic growth projection of 1%-3% and total revenue growth of 2%-4%, with expectations for operating margin expansion of about 100 basis points [6][15] - The company remains open to high-quality acquisitions that can extend long-term growth potential while leveraging its business model to improve margins [66][67] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about entering 2026 with solid momentum, expecting to capitalize on any further improvement in the macro environment [6][15] - The company anticipates that all seven segments will deliver high-quality organic growth and margin improvement in 2026 [16] Other Important Information - The company repurchased $375 million of its shares in Q4 and plans to buy back approximately $1.5 billion of shares in 2026 [8][15] - The company increased its dividend for the 62nd consecutive year, returning a total of $3.3 billion to shareholders [14] Q&A Session Summary Question: Improvement in Test and Measurement segment - Management noted a solid quarter for Test and Measurement, with improvements in bookings and demand for semiconductors, indicating a sustainable recovery [23][25] Question: Margin expansion across businesses - Management expects every segment to improve operating margins in 2026, driven by Enterprise Initiatives and positive operating leverage [27][28] Question: Price-cost dynamics - Management indicated that price-cost is expected to be slightly favorable in 2026, with efforts focused on mitigating increases without passing them on to customers [36][40] Question: Growth in China - Management highlighted strong growth in the automotive segment in China, particularly in the EV space, and expects sustainable growth driven by CBI [78][82] Question: Sequential revenue growth - Management attributed the 4% sequential revenue growth to a broad-based improvement in demand, particularly in segments with higher CBI contributions [88][99]

Financial Data and Key Metrics Changes - In Q4 2025, ITW achieved revenue growth of over 4% and a 7% increase in GAAP EPS to $2.72, with organic growth of 1.3% marking the best quarterly performance of the year [3][4] - Operating income reached $1.1 billion, an increase of 5%, with segment margins at 27.7%, up 120 basis points [4][7] - Free cash flow conversion to net income was 109% for the quarter, and the company repurchased $375 million of its shares [7][8] Business Line Data and Key Metrics Changes - **Automotive OEM**: Revenue increased by 6%, with organic revenue growth of 2%. North America grew by 2%, while Europe declined by 1% [9] - **Food Equipment**: Revenue growth of 4% with organic growth of 1%. Institutional end markets were up in the high single digits, while restaurants were down in the high single digits [10] - **Test and Measurement and Electronics**: Revenue up 6% with organic growth of 2%. Notable improvement in semiconductor-related businesses, which were up mid-single digits [10][11] - **Welding**: Revenue grew 3% with organic growth of 2%, and operating margin reached 33.3%, a 210 basis points improvement [11] - **Polymers and Fluids**: Strong top-line growth of 5% organic growth, supported by new product launches [12] Market Data and Key Metrics Changes - North America grew about 2%, Asia Pacific was up 3%, while Europe declined by 2% [7] - China showed strong growth in the automotive sector, with a 5% increase in Q4 and 12% for the full year [76][78] Company Strategy and Development Direction - ITW is focused on building above-market organic growth through customer-backed innovation (CBI), achieving a 2.4% CBI-fueled revenue growth in 2025 [4][8] - The company aims for a 2030 goal of 3%+ CBI contribution, with patent filings increasing by 9% in 2025 [4][52] - ITW plans to invest approximately $800 million in high-return internal projects to accelerate organic growth and sustain productivity [13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about entering 2026 with solid momentum, projecting organic growth of 1%-3% and EPS guidance midpoint of $11.20, representing 7% growth [5][14] - The company expects all seven segments to improve operating margins in 2026, driven by enterprise initiatives and improved CBI contributions [14][15] Other Important Information - ITW has increased its dividend for the 62nd consecutive year and returned a total of $3.3 billion to shareholders [13] - The company is actively reviewing M&A opportunities but remains selective due to current valuation trends [61][63] Q&A Session Summary Question: Improvement in Test and Measurement Segment - Management noted a solid quarter for Test and Measurement, with improvements in semiconductor demand and general industrial bookings [21][22] Question: Margin Expansion Across Businesses - Management expects all segments to improve operating margins in 2026, driven by enterprise initiatives and positive operating leverage [24][25] Question: Price-Cost Dynamics - Price-cost is expected to be slightly favorable in 2026, with efforts focused on mitigating increases without passing them on to customers [34][35] Question: Seasonality Expectations - Management indicated that 2026 is expected to unfold in line with typical seasonality, with Q1 typically seeing a revenue drop from Q4 [44][46] Question: CBI Contribution to Sales - CBI is expected to continue its strong momentum, with a target of 3%+ by 2030, supported by increased patent filings [51][52] Question: Growth in Automotive Segment in China - Strong growth in the automotive sector in China is anticipated, particularly in the EV space, with significant investments made in this area [75][78] Question: Organic Growth Outlook - North America is expected to see organic growth of about 2%, while Europe remains challenging, and Asia Pacific is projected to grow in the mid-single digits [79][80]

Illinois Tool Works (ITW) came out with quarterly earnings of $2.72 per share, beating the Zacks Consensus Estimate of $2.69 per share. This compares to earnings of $2.54 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of +1.32%. A quarter ago, it was expected that this equipment manufacturer for the transportation, power, food and construction industries would post earnings of $2.69 per share when it actually produced earnings o ...

February 3, 2026 Never stronger. Never better positioned for the future. Forward-Looking Statements Safe Harbor Statement This presentation and related conference call contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements may include, without limitation, statements regarding the potential impact of tariffs, the Company's projected pricing actions, the impact of enterprise initiatives, future financial and operating performance, free ca ...

Financial Performance - Fourth quarter revenue reached $4.1 billion, an increase of 4.1%, with organic revenue growth of 1.3%[6] - GAAP EPS for the fourth quarter was $2.72, reflecting a 7% increase, while full year GAAP EPS was $10.49, exceeding the prior guidance midpoint of $10.45[7][9] - Full year revenue totaled $16 billion, a 0.9% increase, with organic revenue growth flat[8] - Q4 2025 operating revenue increased by 4.1% compared to Q4 2024, with organic growth of 1.3% and a translation impact of 2.5%[25] - Full Year 2025 operating revenue grew by 0.9% compared to Full Year 2024, with organic growth of 0% and a translation impact of 0.8%[27] - Net income for Q4 2025 was $790 million, up from $750 million in Q4 2024, while full year net income decreased to $3,066 million from $3,488 million in 2024[28] - Adjusted net income per share for the twelve months ended December 31, 2024, was reported at $10.15 after accounting for specific adjustments[33] Operating Margin - Operating margin for the fourth quarter was 26.5%, up 30 basis points, with enterprise initiatives contributing 140 basis points[7] - The total operating margin for Q4 2025 was 26.5%, reflecting a 30 basis points increase from the previous year, despite an unfavorable impact of 50 basis points from amortization expenses related to acquisition-related intangible assets[25] - The total operating margin for Full Year 2025 was 26.3%, which includes a 50 basis points unfavorable impact from amortization expenses related to acquisition-related intangible assets[27] - Operating margin for 2026 is expected to be in the range of 26.5% to 27.5%, with enterprise initiatives contributing 100 basis points[13] - All seven segments are anticipated to deliver positive organic growth and operating margin expansion in 2026[14] - Operating leverage improved in several segments, with Automotive OEM and Measurement & Electronics both seeing a 40 basis points increase in operating margin[25] Cash Flow and Investments - Free cash flow is projected to exceed 100% of net income, with plans to repurchase approximately $1.5 billion of shares[14] - Net cash provided by operating activities for Q4 2025 was $963 million, compared to $1,114 million in Q4 2024, reflecting a decrease of 13.5%[31] - Free cash flow for the twelve months ended December 31, 2025, was $2,707 million, down from $2,844 million in 2024, indicating a decline of 4.8%[31] - The net cash provided by operating activities to net income conversion rate improved to 122% in Q4 2025, compared to 149% in Q4 2024[31] - The free cash flow to net income conversion rate was 109% for Q4 2025, down from 133% in Q4 2024[31] - The average invested capital for the twelve months ended December 31, 2025, was $10,959 million, with a return on average invested capital of 29.3%[28] - The company reported a total invested capital of $11,344 million as of December 31, 2025, compared to $10,232 million in 2024[28] Tax and Projections - The effective tax rate for 2026 is projected to be between 23.5% and 24.5%[14] - The effective tax rate for the twelve months ended December 31, 2025, was reported at 22.7%, adjusted to 23.9% after accounting for discrete tax benefits[29] Revenue Growth Initiatives - Customer-Back Innovation initiatives contributed 2.4% to revenue growth in 2025, enhancing overall performance[5][11] - The company projects 2026 revenue growth of 2% to 4% and organic growth of 1% to 3%[12] Nonrecurring Items - The impact of the sale of noncontrolling interest in Wilsonart reduced the reported net income per share by $1.26[33] - A cumulative effect of change in inventory accounting method resulted in a reduction of $0.30 in net income per share, net of tax[33] - The pre-tax gain on the sale of noncontrolling interest in Wilsonart was $363 million, contributing to the adjusted net income[33] - The change from LIFO to FIFO accounting method for certain U.S. businesses had a pre-tax impact of $117 million[33]

Illinois Tool Works Inc. (NYSE:ITW) is included among the Dividend Growth Stocks: 25 Aristocrats. Illinois Tool Works (ITW) Maintains Dividend Growth Through Business Cycles Illinois Tool Works has been operating for more than a century and has built a business that is difficult to replicate. Its competitive edge comes from scale, deep customer relationships, and a sizable intellectual property portfolio with more than 17,000 granted and pending patents. The company’s dividend history stands out even am ...

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Fourth Quarter 2025 Highlights Revenue of $4.1 billion, an increase of 4.1%Operating margin of 26.5%, as enterprise initiatives contributed 140 bpsGAAP EPS of $2.72, an increase of 7% 2025 Highlights Revenue of $16 billion, an increase of 0.9%Customer-Back Innovation contributed 2.4% to revenue growth, an increase of 40 bpsOperating margin of 26.3%, as enterprise initiatives contributed 130 bpsGAAP EPS of $10.49 exceeded the prior guidance mid-point of $10.45 2026 Guidance Revenue growth of 2 to 4%, organic ...