Illinois Tool Works (ITW) AI Stock Analysis

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Illinois Tool Works

(NYSE:ITW)

Rating:80Outperform

Price Target:

$281.00

▲( 14.83% Upside)

Illinois Tool Works shows strong financial and operational performance, with robust profitability margins and growth in key regions such as Asia Pacific and China. Technical indicators suggest balanced market sentiment, while the valuation remains attractive with a reasonable P/E ratio and dividend yield. Despite some challenges in organic growth and certain segments, the company’s effective management of tariffs and strategic initiatives support a solid investment outlook.

Positive Factors

Margin performance

ITW’s margin performance has been very consistent, delivering 46% incremental margins since 2016.

Return on assets

ITW returns are materially higher than the sector, reporting 32.3% return-on-tangible assets in 2023 versus the sector average of 19.5%.

Tariff impact

The company highlighted minimal tariff impact for Auto OEM, which was a positive surprise.

Negative Factors

Demand weakness

Industry data supports broad demand weakness across the portfolio.

Growth and margin expansion

The company will face headwinds to growth and margin expansion given its exposure to automotive and consumer markets, driving negative consensus revisions.

Sales and earnings forecast

The 2025 guide came in below BofAe/consensus and incorporates no improvement in the macro from current levels.

Illinois Tool Works (ITW) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$71.70B

Dividend Yield2.41%

Average Volume (3M)1.23M

Price to Earnings (P/E)21.5

Beta (1Y)0.78

Revenue Growth-1.85%

EPS Growth12.04%

CountryUS

Employees44,000

SectorIndustrials

Sector Strength90

IndustryIndustrial - Machinery

Share Statistics

EPS (TTM)2.38

Shares Outstanding293,000,000

10 Day Avg. Volume979,304

30 Day Avg. Volume1,230,882

Financial Highlights & Ratios

PEG Ratio-7.13

Price to Book (P/B)22.05

Price to Sales (P/S)0.00

P/FCF Ratio30.24

Enterprise Value/Market Cap1.09

Enterprise Value/Revenue1.23

Enterprise Value/Gross Profit11.43

Enterprise Value/Ebitda3.98

Forecast

1Y Price Target

$245.50

Price Target Upside0.32% Upside

Rating ConsensusHold

Number of Analyst Covering11

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 Key Performance Indicators (KPIs)

Any

Revenue by Segment

Revenue by Segment
Shows revenue distribution across different business segments, highlighting which areas drive growth and profitability, and indicating diversification or concentration risks.

Chart InsightsIllinois Tool Works' Automotive OEM segment shows resilience with growth in China, driven by EV market gains, despite a slight revenue dip in recent quarters. The Food Equipment segment maintains steady growth, supported by institutional demand. However, Construction Products and Test & Measurement face headwinds, with organic growth challenges and revenue declines. The company is effectively managing tariffs and maintaining strong margins, but overall organic growth remains a concern. Strategic pricing and supply chain actions are expected to neutralize tariff impacts by year-end, potentially stabilizing earnings.

Data provided by:

Main Street Data

Illinois Tool Works Financial Statement Overview

Summary

Illinois Tool Works demonstrates robust financial health with strong profitability margins and effective cash flow management, albeit with a slight decline in revenue and free cash flow in the latest period. The balance sheet shows moderate leverage, reflecting potential for improved equity positioning. Overall, ITW is well-positioned in the industrial machinery sector with a focus on sustaining growth and profitability.

Income Statement

Very Positive

Illinois Tool Works shows a strong gross profit margin of approximately 43.5% for TTM, indicating efficiency in production. The net profit margin is robust at 21.4% for TTM, reflecting effective cost management. However, the slight revenue decline in TTM compared to 2024 suggests a need for growth strategies. EBIT and EBITDA margins remain healthy, supporting profitability.

Balance Sheet

Positive

The company's balance sheet reflects a moderate debt-to-equity ratio of 2.55 for TTM, indicating manageable but notable leverage. With a return on equity of 103.9% for TTM, ITW exhibits strong profitability relative to shareholder investment. The equity ratio of 23.1% suggests the company maintains a balanced asset structure, but there's room for improvement in equity levels.

Cash Flow

Very Positive

ITW delivers a solid free cash flow, though the free cash flow declined by 17.4% in TTM, compared to 2024. The operating cash flow to net income ratio of 0.8 for TTM indicates efficient cash operations, while the free cash flow to net income ratio of 0.7 highlights strong cash generation relative to earnings.

TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
15.76B	15.90B	16.11B	15.93B	14.46B	12.57B
	Gross Profit
6.87B	7.04B	6.79B	6.50B	5.97B	5.20B
	EBIT
4.09B	4.26B	4.04B	3.79B	3.48B	2.88B
	EBITDA
4.91B	5.11B	4.48B	4.24B	3.91B	3.32B
	Net Income Common Stockholders
3.37B	3.49B	2.96B	3.03B	2.69B	2.11B
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
873.00M	948.00M	1.06B	708.00M	1.53B	2.56B
	Total Assets
15.47B	15.07B	15.52B	15.42B	16.08B	15.61B
	Total Debt
8.26B	8.08B	8.37B	7.76B	7.69B	8.12B
	Net Debt
7.39B	7.13B	7.30B	7.05B	6.16B	5.56B
	Total Liabilities
12.23B	11.75B	12.51B	12.33B	12.45B	12.43B
	Stockholders Equity
3.24B	3.32B	3.01B	3.09B	3.63B	3.18B
Cash Flow		Free Cash Flow
2.85B	2.84B	3.08B	1.94B	2.26B	2.57B
	Operating Cash Flow
3.28B	3.28B	3.54B	2.35B	2.56B	2.81B
	Investing Cash Flow
-84.00M	-144.00M	-403.00M	-110.00M	-984.00M	-214.00M
	Financing Cash Flow
-3.25B	-3.19B	-2.78B	-3.00B	-2.56B	-2.05B

Illinois Tool Works Technical Analysis

Technical Analysis Sentiment

Negative

Last Price244.71

Price Trends

50DMA

242.48

Positive

100DMA

249.36

Negative

200DMA

252.37

Negative

Market Momentum

MACD

2.01

Negative

RSI

50.87

Neutral

STOCH

38.59

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 244.71 is above the 20-day moving average (MA) of 244.22, above the 50-day MA of 242.48, and below the 200-day MA of 252.37, indicating a neutral trend. The MACD of 2.01 indicates Negative momentum. The RSI at 50.87 is Neutral, neither overbought nor oversold. The STOCH value of 38.59 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 (64)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ITW	80 Outperform	$71.70B	21.54	107.62%	2.41%	-1.85%	12.04%
HWM	79 Outperform	$66.65B	53.83	28.29%	0.19%	10.01%	47.87%
ROP	78 Outperform	$61.18B	41.05	8.09%	0.55%	13.34%	1.98%
PH	76 Outperform	$83.99B	25.30	27.16%	0.99%	-0.23%	22.41%
EMR	73 Outperform	$66.37B	28.16	9.82%	1.81%	6.49%	24.14%
ROK	68 Neutral	$34.53B	38.56	25.86%	1.70%	-11.19%	-22.50%
Sector *	64 Neutral	$4.39B	11.81	5.17%	249.38%	3.98%	-12.17%

* Industrials Sector Average

Performance Comparison

ITW

Illinois Tool Works

244.71

10.25

4.37%

EMR

Emerson Electric Company

117.35

5.93

5.32%

Parker Hannifin

654.96

130.56

24.90%

ROK

Rockwell Automation

305.54

46.11

17.77%

ROP

Roper Technologies

567.03

25.50

4.71%

HWM

Howmet Aerospace

163.01

78.54

92.98%

Illinois Tool Works Earnings Call Summary

Earnings Call Date:Apr 30, 2025

(Q1-2025)

% Change Since: 1.22%|

Next Earnings Date:Aug 05, 2025

Earnings Call Sentiment Neutral

The earnings call presented a mix of positive and negative aspects. While there were strong performances in certain segments and geographies, particularly in Asia Pacific and China, other segments such as Construction Products and Test & Measurement faced challenges. The company's ability to manage tariffs through pricing actions and maintain strong margins despite revenue declines is a positive sign. However, the overall decline in organic growth and the tough market conditions in certain segments balance the sentiment.

Q1-2025 Updates

Positive Updates

Solid Operating Margins

Enterprise initiatives contributed 120 basis points to operating margins of 24.8%, indicating strong operational efficiency.

GAAP EPS Exceeds Expectations

GAAP EPS of $2.38 came in ahead of planned expectations, driven by a lower effective tax rate.

Strong Growth in Asia Pacific and China

Organic revenue in Asia Pacific was up 7%, with China up 12%, driven by strong performance in the automotive OEM business.

Food Equipment Segment Growth

Food Equipment organic growth was up more than 1% and up 3% on an equal days’ basis, with strength in institutional end markets.

Automotive OEM Market Share Gains

Automotive OEM segment in China grew 14%, driven by gains in the rapidly growing EV market.

Improved Operating Margin in Polymers & Fluids

Polymers & Fluids organic revenue grew 2%, with operating margin improving 70 basis points to 26.5%.

Negative Updates

Decline in Organic Growth

Overall organic growth was down 1.6%, with total revenue down 3.4% due to foreign currency translation and product line simplification.

Challenges in Construction Products

Construction Products organic growth was down 7% due to tough end-markets, with North America down 10%.

Test & Measurement and Electronics Decline

Organic revenue in Test & Measurement and Electronics was down 5% due to tough comparisons, with the MTS business down 19%.

Welding Market Weakness

Welding organic growth was essentially flat, with North America down 2% and the Commercial side down 6%.

Company Guidance

In the first quarter of 2025, ITW reported flat organic growth on an equal days’ basis amidst a steady demand environment, with operating margins reaching 24.8%, bolstered by enterprise initiatives contributing 120 basis points. The company achieved a GAAP EPS of $2.38, surpassing expectations. ITW maintained its full-year EPS guidance of $10.15 to $10.55, opting not to incorporate the upside from favorable Q1 results and foreign exchange rates. Key metrics included a free cash flow of $496 million with a 71% conversion rate, and a notable 3.4% decline in total revenue due to a 1.8% impact from foreign currency translation. Regionally, organic revenue saw a 3% decline in North America and Europe, while Asia Pacific experienced a 7% increase, driven by a 12% growth in China, particularly in the automotive OEM sector. The company remains focused on mitigating tariff impacts through strategic pricing and supply chain actions, projecting these efforts to be EPS neutral or better by year-end.

Illinois Tool Works Corporate Events

Executive/Board ChangesShareholder Meetings

Illinois Tool Works Elects Directors at Annual Meeting

Neutral

May 7, 2025

On May 2, 2025, Illinois Tool Works Inc. held its annual stockholders meeting, where all twelve director nominees were elected. Additionally, the advisory vote on executive compensation was approved, and Deloitte & Touche LLP was ratified as the independent registered public accounting firm for 2025. However, a stockholder proposal for requiring ratification of executive termination pay was defeated.

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.