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Illinois Tool Works (ITW)
NYSE:ITW
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Illinois Tool Works
(NYSE:ITW)80Outperform
Positive Factors
Financial Performance
ITW reported 4Q24 earnings that came in above consensus levels, showcasing the company's ability to exceed earnings expectations despite challenges.
Margins
Margins were better than forecast, expanding 140bps year-over-year led by Auto OEM and Specialty Products.
Negative Factors
Growth Comparison
ITW has struggled to deliver organic growth and earnings growth in line with peers, with its EPS growth lagging behind.
Market Environment
The end market environment remains weak, and the company may have to lower its organic revenue guidance.
Sales Performance
Revenue of $3.966 billion came in below the $4.018 billion consensus and the $4.024 billion estimate, indicating challenges in meeting sales expectations.
Illinois Tool Works (ITW) vs. S&P 500 (SPY)
Market Cap
$77.48B
Dividend Yield2.2%
Average Volume (3M)1.03M
Price to Earnings (P/E)22.5
Beta (1Y)0.85
Revenue Growth-1.30%
EPS Growth20.26%
CountryUS
Employees45,000
SectorIndustrials
Sector Strength66
IndustryIndustrial Goods
Share Statistics
EPS (TTM)11.71
Shares Outstanding293,500,000
10 Day Avg. Volume1,030,789
30 Day Avg. Volume1,026,945
Financial Highlights & Ratios
PEG Ratio1.11
Price to Book (P/B)N/A
Price to Sales (P/S)4.87
Price to Cash Flow (P/CF)17.40
P/FCF Ratio17.40
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$266.67Price Target Upside4.45% Upside
Rating ConsensusHold
Number of Analyst Covering9
Illinois Tool Works Business Overview & Revenue Model
Company DescriptionIllinois Tool Works (ITW) is a diversified, global manufacturer of industrial products and equipment. Headquartered in Glenview, Illinois, ITW operates in seven major segments: Automotive OEM, Food Equipment, Test & Measurement and Electronics, Polymers & Fluids, Welding, Construction Products, and Specialty Products. The company focuses on providing innovative solutions and specialized services to a wide range of industries worldwide.
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
255.32
Price Trends
257.20
Negative
261.46
Negative
251.80
Positive
Market Momentum
0.79
Positive
42.72
Neutral
35.70
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 255.32 is below the 20-day moving average (MA) of 259.83, below the 50-day MA of 257.20, and above the 200-day MA of 251.80, indicating a neutral trend. The MACD of 0.79 indicates Positive momentum. The RSI at 42.72 is Neutral, neither overbought nor oversold. The STOCH value of 35.70 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 |
|---|---|---|---|---|---|---|---|
80 Outperform | $77.48B | 22.54 | 105.16% | 2.20% | -1.30% | 20.26% | |
77 Outperform | $27.28B | 10.22 | 38.79% | 1.06% | -2.99% | 159.26% | |
74 Outperform | $64.30B | 27.12 | 9.14% | 1.80% | 10.29% | 22.72% | |
68 Neutral | $135.18B | 23.89 | 596.13% | 2.08% | 5.05% | 2.73% | |
66 Neutral | $31.51B | 34.67 | 27.22% | 1.84% | -11.28% | -23.69% | |
62 Neutral | $8.11B | 13.34 | 1.17% | 3.02% | 4.16% | -15.14% | |
48 Neutral | $13.36B | 45.73 | 3.38% | 3.88% | -2.63% | ― |
* Industrials Sector Average
Performance Comparison
ITW
Illinois Tool Works
255.32
3.26
1.29%
DOV
Dover
184.06
18.58
11.23%
EMR
Emerson Electric Company
114.03
6.95
6.49%
HON
Honeywell International
208.00
14.75
7.63%
ROK
Rockwell Automation
267.87
-14.53
-5.15%
SWK
Stanley Black & Decker
81.45
-3.56
-4.19%
Illinois Tool Works Earnings Call Summary
Earnings Call Date: Feb 5, 2025 | % Change Since: 0.25% | 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.