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Illinois Tool Works (ITW)
NYSE:ITW
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Illinois Tool Works
(NYSE:ITW)
74Outperform
Positive Factors
Earnings
3Q24 EPS of $2.65 beat the $2.52 consensus and the $2.50 estimate with tax contributing $0.09/share.
Financial Performance
The company has best-in-class margins and returns.
Negative Factors
Growth
ITW has struggled to deliver organic growth and earnings growth in line with peers.
Market Conditions
The end market environment remains weak, and the company may have to lower its organic revenue guidance.
Revenue
Revenue of $3.966 billion came in below the $4.018 billion consensus and the $4.024 billion estimate, with mixed results across segments.
Illinois Tool Works (ITW) vs. S&P 500 (SPY)
Market Cap
$66.17B
Dividend Yield2.62%
Average Volume (3M)1.26M
Price to Earnings (P/E)19.3
Beta (1Y)0.82
Revenue Growth-1.30%
EPS Growth20.26%
CountryUS
Employees44,000
SectorIndustrials
Sector Strength63
IndustryIndustrial - Machinery
Share Statistics
EPS (TTM)11.71
Shares Outstanding293,365,970
10 Day Avg. Volume1,184,485
30 Day Avg. Volume1,257,532
Financial Highlights & Ratios
PEG Ratio0.95
Price to Book (P/B)N/A
Price to Sales (P/S)4.64
Price to Cash Flow (P/CF)16.60
P/FCF Ratio16.60
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$264.70Price Target Upside17.35% Upside
Rating ConsensusHold
Number of Analyst Covering10
Illinois Tool Works Business Overview & Revenue Model
Company DescriptionIllinois Tool Works Inc. manufactures and sells industrial products and equipment worldwide. It operates through seven segments: Automotive OEM; Food Equipment; Test & Measurement and Electronics; Welding; Polymers & Fluids; Construction Products; and Specialty Products. The Automotive OEM segment offers plastic and metal components, fasteners, and assemblies for automobiles, light trucks, and other industrial uses. The Food Equipment segment provides warewashing, refrigeration, cooking, and food processing equipment; kitchen exhaust, ventilation, and pollution control systems; and food equipment maintenance and repair services. The Test & Measurement and Electronics segment produces and sells equipment, consumables, and related software for testing and measuring of materials and structures, as well as equipment and consumables used in the production of electronic subassemblies and microelectronics. The Welding segment produces arc welding equipment; and metal arc welding consumables and related accessories. The Polymers & Fluids segment produces adhesives, sealants, lubrication and cutting fluids, and fluids and polymers for auto aftermarket maintenance and appearance. The Construction Products segment offers engineered fastening systems and solutions for the residential construction, renovation/remodel, and commercial construction markets. The Specialty Products segment offers beverage packaging equipment and consumables, product coding and marking equipment and consumables, and appliance components and fasteners. It serves the automotive OEM/tiers, commercial food equipment, construction, general industrial, and automotive aftermarket end markets. The company distributes its products directly to industrial manufacturers, as well as through independent distributors. Illinois Tool Works Inc. was founded in 1912 and is based in Glenview, Illinois.
How the Company Makes MoneyIllinois Tool Works generates revenue through the design, manufacture, and sale of a diverse range of industrial products and equipment. The company's revenue model is built around its seven business segments, each contributing to the overall financial performance. Key revenue streams include the sale of specialized automotive components, commercial food equipment, testing and measurement devices, welding products, and construction materials. ITW's decentralized business model, which emphasizes customer-driven innovation and operational efficiency, allows it to maintain strong margins. Strategic acquisitions and partnerships further enhance its product offerings and market reach, contributing to sustained revenue growth.
Illinois Tool Works Financial Statement Overview
Summary
Illinois Tool Works exhibits strong financial health characterized by robust profitability and efficient cash flow management. The company maintains a high ROE and healthy margins, though revenue growth has slightly declined. Leverage is high but managed, with strong cash flow supporting stability.Income Statement
Illinois Tool Works shows strong profitability metrics with a consistent Gross Profit Margin of around 44%-45% over the years. The Net Profit Margin has improved to 21.9% in 2024 from 18.4% in 2023, indicating enhanced efficiency in converting revenue to profit. However, there is a slight decline in Total Revenue in 2024, presenting a challenge for growth.85
Very Positive
Balance Sheet
The company maintains a stable financial position with a Debt-to-Equity Ratio of 2.37 in 2024, showing high leverage but within the industry norms. The Return on Equity improved to 105.2% from 98.1%, reflecting effective use of equity. The Equity Ratio is relatively low at 24.2%, indicating potential risks if liabilities grow.78
Positive
Cash Flow
The cash flow generation is strong, with a Free Cash Flow to Net Income Ratio of 0.94, showing efficient cash conversion. Operating Cash Flow to Net Income is 0.94, indicating robust operating performance. Free Cash Flow growth is notable, supporting strategic investments and debt service.90
Very Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 15.90B | 16.11B | 15.93B | 14.46B | 12.57B | Gross Profit |
| 7.04B | 6.79B | 6.50B | 5.97B | 5.20B | EBIT |
| 4.26B | 4.04B | 3.79B | 3.48B | 2.88B | EBITDA |
| 5.11B | 4.48B | 4.24B | 3.91B | 3.32B | Net Income Common Stockholders |
| 3.49B | 2.96B | 3.03B | 2.69B | 2.11B |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 948.00M | 1.06B | 708.00M | 1.53B | 2.56B | Total Assets |
| 13.69B | 15.52B | 15.42B | 16.08B | 15.61B | Total Debt |
| 8.08B | 8.37B | 7.76B | 7.69B | 8.12B | Net Debt |
| 7.13B | 7.30B | 7.05B | 6.16B | 5.56B | Total Liabilities |
| 10.38B | 12.51B | 12.33B | 12.45B | 12.43B | Stockholders Equity |
| 3.32B | 3.01B | 3.09B | 3.63B | 3.18B |
| Cash Flow | Free Cash Flow | |||
| 3.28B | 3.08B | 1.94B | 2.26B | 2.57B | Operating Cash Flow |
| 3.28B | 3.54B | 2.35B | 2.56B | 2.81B | Investing Cash Flow |
| -144.00M | -403.00M | -110.00M | -984.00M | -214.00M | Financing Cash Flow |
| -3.19B | -2.78B | -3.00B | -2.56B | -2.05B |
Illinois Tool Works Technical Analysis
Negative
225.57
Price Trends
255.40
Negative
258.63
Negative
252.09
Negative
Market Momentum
-2.52
Positive
43.53
Neutral
22.59
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ITW, the sentiment is Negative. The current price of 225.57 is below the 20-day moving average (MA) of 250.31, below the 50-day MA of 255.40, and below the 200-day MA of 252.09, indicating a bearish trend. The MACD of -2.52 indicates Positive momentum. The RSI at 43.53 is Neutral, neither overbought nor oversold. The STOCH value of 22.59 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for ITW.
Illinois Tool Works Risk Analysis
Illinois Tool Works disclosed 17 risk factors in its most recent earnings report. Illinois Tool Works reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Illinois Tool Works Peers Comparison
Overall Rating
UnderperformOutperform
Sector (62)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
78 Outperform | $58.18B | 37.77 | 8.53% | 0.57% | 13.94% | 13.02% | |
74 Outperform | $66.17B | 19.26 | 110.24% | 2.62% | -1.30% | 20.26% | |
74 Outperform | $66.60B | 21.40 | 25.87% | 1.26% | 0.41% | 19.76% | |
73 Outperform | $45.50B | 39.94 | 26.89% | 0.28% | 11.90% | 52.65% | |
72 Outperform | $53.33B | 22.49 | 9.66% | 2.23% | 10.29% | 22.72% | |
69 Neutral | $25.68B | 28.26 | 26.22% | 2.25% | -11.28% | -23.69% | |
62 Neutral | $7.25B | 12.39 | 3.08% | 3.39% | 3.63% | -14.32% |
* Industrials Sector Average
Performance Comparison
ITW
Illinois Tool Works
225.57
-30.35
-11.86%
EMR
Emerson Electric Company
94.57
-18.06
-16.03%
PH
Parker Hannifin
517.23
-42.83
-7.65%
ROK
Rockwell Automation
227.11
-49.76
-17.97%
ROP
Roper Technologies
541.80
1.69
0.31%
HWM
Howmet Aerospace
112.33
45.80
68.84%
Illinois Tool Works Earnings Call Summary
Earnings Call Date: Feb 5, 2025 | % Change Since: -10.89% | Next Earnings Date: May 6, 2025
Earnings Call Sentiment Positive
The earnings call reflected a strong operational performance with record operating margin and free cash flow improvements. Despite challenges such as a decline in organic revenue and non-operational headwinds, the company showed resilience and strategic positioning for future growth, particularly highlighted by improvements in key segments and innovation initiatives.Highlights
Record Operating Margin and Free Cash Flow
Illinois Tool Works Inc. achieved record operating margin of 26.2%, an increase of 140 basis points, and free cash flow increased by 10% with a conversion to net income of 133%.
Improved GAAP EPS
GAAP EPS improved by 7% to $2.54, despite a slight decline in total revenues.
Continued Progress in Automotive OEM and Construction Products
Achieved record financial results, particularly evident in segments such as automotive OEM and construction products.
Patent Filings Increase
Patent filings increased by 18% in 2024, indicating strong progress in customer-back innovation.
Lowlights
Decline in Organic Revenue
Organic revenue declined by 0.5% in Q4, with North America down 1.5% and Europe down 3%.
Construction Products Segment Challenges
Construction products segment faced a 4% decline in organic growth due to a tough market as new housing starts were down globally.
Non-Operational Headwinds for 2025
EPS guidance for 2025 includes non-operational headwinds, including a $0.30 impact from foreign currency translation and increased restructuring expenses.
Company Guidance
In the conference call, Illinois Tool Works Inc. provided guidance for the full year 2025, expecting organic growth of 1% to 3% excluding product line simplification. The company projected a midpoint GAAP EPS of $10.35, reflecting non-operational headwinds, including a $0.30 impact from foreign currency translation. They anticipate a 100 basis point improvement in operating margins, driven by enterprise initiatives, independent of volume. The company aims for free cash flow conversion greater than 100% and plans to repurchase $1.5 billion in shares. Additionally, they highlighted their goal to achieve a 3% plus customer-backed innovation (CBI) yield by 2030, with a notable 18% increase in patent filings in 2024.Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.