Illinois Tool Works (ITW) AI Stock Analysis

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Illinois Tool Works

(NYSE:ITW)

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Outperform 71 (OpenAI - 4o)

Rating:71Outperform

Price Target:

$272.00

▲(3.24% Upside)

Illinois Tool Works scores a 71, driven by strong financial performance and positive earnings call highlights. The company's profitability and cash generation are robust, but high leverage and flat revenue growth are concerns. Technical indicators suggest a bearish trend, while valuation metrics show moderate attractiveness. The earnings call reflects confidence in the company's operations despite some segment challenges.

Positive Factors

Strong Profitability

ITW's consistent profitability margins indicate efficient operations and a strong ability to convert sales into profit, supporting long-term financial stability.

Cash Generation

Strong cash generation allows ITW to reinvest in growth opportunities, pay dividends, and reduce debt, enhancing its financial flexibility and resilience.

Dividend Increase

Consistent dividend increases reflect ITW's robust cash flow and management's confidence in sustaining shareholder returns, reinforcing investor trust.

Negative Factors

High Leverage

High leverage can limit financial flexibility and increase risk, especially in downturns, potentially impacting ITW's ability to invest in growth or weather economic challenges.

Flat Revenue Growth

Stagnant revenue growth may indicate market saturation or competitive pressures, challenging ITW's ability to expand its market share and drive future earnings.

Segment Challenges

Ongoing challenges in key segments like construction and polymers & fluids could hinder overall performance, requiring strategic adjustments to regain momentum.

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

Market Cap

$76.43B

Dividend Yield2.43%

Average Volume (3M)1.16M

Price to Earnings (P/E)25.6

Beta (1Y)0.70

Revenue Growth-0.41%

EPS Growth-10.88%

CountryUS

Employees44,000

SectorIndustrials

Sector Strength72

IndustryIndustrial - Machinery

Share Statistics

EPS (TTM)2.81

Shares Outstanding290,100,000

10 Day Avg. Volume1,524,054

30 Day Avg. Volume1,163,507

Financial Highlights & Ratios

PEG Ratio1.06

Price to Book (P/B)22.69

Price to Sales (P/S)4.73

P/FCF Ratio26.46

Enterprise Value/Market Cap1.10

Enterprise Value/Revenue5.29

Enterprise Value/Gross Profit12.13

Enterprise Value/Ebitda18.26

Forecast

1Y Price Target

$258.57

Price Target Upside-1.86% Downside

Rating ConsensusModerate Sell

Number of Analyst Covering7

EPS Forecast (FY)11.18

Revenue Forecast (FY)$16.54B

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 MoneyITW generates revenue through a combination of product sales, services, and solutions tailored to meet the needs of various industries. The company operates under a decentralized business model, allowing its subsidiaries to adapt quickly to market demands and customer preferences. Key revenue streams include sales of engineered fasteners and components, food processing equipment, and welding products. ITW also benefits from long-standing partnerships with major manufacturers across different sectors, contributing to stable demand for its products. Additionally, the company invests in research and development to create innovative products, enhancing its competitive edge and driving revenue growth.

Illinois Tool Works Key Performance Indicators (KPIs)

Any

Revenue by Segment

Revenue by Segment
Shows how much each business segment contributes to total sales, indicating diversification and potential growth areas within the company.

Chart InsightsIllinois Tool Works' Automotive OEM segment shows robust growth, bolstered by strong performance in China and an improved operating margin. Despite challenges in North America and Europe, the company raised its full-year guidance, reflecting confidence in its strategic initiatives. The Welding segment also shows positive momentum, while the Construction Products segment faces headwinds. Overall, ITW's focus on pricing actions and innovation supports its goal to outperform end markets, with a promising outlook for the remainder of 2025.

Data provided by:

The Fly

Illinois Tool Works Earnings Call Summary

Earnings Call Date:Oct 24, 2025

(Q3-2025)

% Change Since: |

Next Earnings Date:Feb 03, 2026

Earnings Call Sentiment Neutral

The earnings call highlighted ITW's ability to deliver strong financial results in a challenging demand environment, with significant successes in its automotive and welding segments. However, the company continues to face challenges in certain segments, such as construction and polymers & fluids, which experienced revenue declines.

Q3-2025 Updates

Positive Updates

Revenue Growth and Strong Financial Performance

ITW reported a 3% increase in revenue for Q3 2025 excluding a 1% reduction due to strategic product line simplification. Organic growth was 1%, with a 2% contribution from favorable foreign currency translation. Operating income grew by 6% to $1.1 billion, and operating margin improved by 90 basis points to 27.4%.

Automotive OEM Segment Success

The automotive OEM segment reported a 7% increase in revenue and 5% organic growth. The segment saw a 240 basis point improvement in operating margin to 21.8%. China experienced a 10% revenue growth, driven by market share gains in the EV market.

Welding Segment Performance

The Welding segment achieved 3% organic growth with equipment sales up 6% and consumables down 2%. The segment's operating margin improved by 30 basis points to 32.6%.

Dividend Increase and Share Repurchases

ITW announced its 62nd consecutive dividend increase, raising it by 7%. The company has repurchased over $1.1 billion of its outstanding shares year-to-date.

Negative Updates

Challenging Demand Environment

Despite a 1% organic growth, the demand environment remained challenging with some segments like Test & Measurement and Electronics experiencing a 1% and 2% decline respectively.

Construction Products Segment Decline

The Construction Products segment saw a 1% revenue decline, with organic revenue down 2%. Despite market headwinds, operating margin improved by 140 basis points to 31.6%.

Polymers & Fluids Segment Revenue Decline

The Polymers & Fluids segment experienced a 2% decline in revenue, with organic revenue down 3%. Polymers declined 5% against a difficult comparison from the previous year.

Company Guidance

In the third quarter of 2025, ITW provided updated guidance for the full year, highlighting a strong operational and financial performance despite a challenging demand environment. The company achieved a 3% increase in revenue, with organic growth at 1%, and favorable foreign currency translation contributing 2%. Notably, ITW's GAAP EPS was $2.81, and operating income grew by 6% to reach $1.1 billion, with a 90 basis point improvement in operating margin to 27.4%. The ITW team effectively managed controllable factors, with enterprise initiatives contributing 140 basis points to operating margins. ITW also announced its 62nd consecutive dividend increase of 7% and repurchased over $1.1 billion in shares year-to-date. Looking ahead, ITW narrowed its EPS guidance range to $10.40-$10.50 for the full year, reflecting confidence in leveraging the company's strong business model and diversified portfolio, despite projecting organic growth towards the lower end of its 0%-2% guidance.

Illinois Tool Works Financial Statement Overview

Summary

Illinois Tool Works exhibits strong profitability and cash generation capabilities, with consistent margins and a solid return on equity. However, the high leverage and recent stagnation in revenue growth could be potential risks. Overall, the company is financially sound but should monitor its debt levels and seek to reinvigorate revenue growth.

Income Statement

Very Positive

Illinois Tool Works demonstrates strong profitability with a consistent gross profit margin around 43-44% and a solid net profit margin of approximately 19-22% over the years. The EBIT and EBITDA margins are also robust, indicating efficient operations. However, revenue growth has been relatively flat recently, with a slight decline in the latest TTM period, which could be a concern if it continues.

Balance Sheet

Positive

The company maintains a high debt-to-equity ratio, indicating significant leverage, which could pose a risk if not managed carefully. Return on equity is impressive, consistently above 90%, showcasing strong profitability relative to shareholder equity. The equity ratio is relatively low, reflecting the high leverage.

Cash Flow

Positive

Operating cash flow is strong, covering net income well, and free cash flow has shown growth in the latest TTM period. However, fluctuations in free cash flow growth in previous years suggest some volatility. The free cash flow to net income ratio remains healthy, indicating good cash generation relative to earnings.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	15.88B	15.90B	16.11B	15.93B	14.46B	12.57B
Gross Profit	6.93B	6.94B	6.68B	6.37B	5.83B	5.04B
EBITDA	4.61B	5.11B	4.48B	4.46B	3.94B	3.34B
Net Income	3.03B	3.49B	2.96B	3.03B	2.69B	2.11B
Balance Sheet
Total Assets	16.14B	15.07B	15.52B	15.42B	16.08B	15.61B
Cash, Cash Equivalents and Short-Term Investments	924.00M	948.00M	1.06B	708.00M	1.53B	2.56B
Total Debt	8.94B	8.08B	8.37B	7.95B	7.88B	8.31B
Total Liabilities	12.93B	11.75B	12.51B	12.33B	12.45B	12.43B
Stockholders Equity	3.21B	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	-417.00M	-144.00M	-403.00M	-110.00M	-984.00M	-214.00M
Financing Cash Flow	-2.87B	-3.19B	-2.78B	-3.00B	-2.56B	-2.05B

Illinois Tool Works Technical Analysis

Technical Analysis Sentiment

Positive

Last Price263.47

Price Trends

50DMA

249.90

Positive

100DMA

252.87

Positive

200DMA

249.39

Positive

Market Momentum

MACD

2.62

Negative

RSI

65.91

Neutral

STOCH

92.70

Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ITW, the sentiment is Positive. The current price of 263.47 is above the 20-day moving average (MA) of 253.16, above the 50-day MA of 249.90, and above the 200-day MA of 249.39, indicating a bullish trend. The MACD of 2.62 indicates Negative momentum. The RSI at 65.91 is Neutral, neither overbought nor oversold. The STOCH value of 92.70 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive 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 (63)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
PH	79 Outperform	$119.15B	33.63	27.30%	0.79%	0.22%	26.66%
EMR	76 Outperform	$83.97B	36.94	10.91%	1.58%	2.97%	18.14%
ETN	75 Outperform	$133.51B	34.38	20.69%	1.29%	8.24%	6.21%
ITW	71 Outperform	$76.43B	25.57	91.71%	2.43%	-0.41%	-10.88%
ROK	71 Outperform	$46.72B	54.20	24.24%	1.33%	0.98%	-7.51%
ROP	71 Outperform	$44.79B	28.69	8.16%	0.73%	13.95%	6.80%
Sector *	63 Neutral	$10.79B	15.43	7.44%	2.01%	2.89%	-14.66%

* Industrials Sector Average

Performance Comparison

ITW

Illinois Tool Works

263.47

6.83

2.66%

ETN

Eaton

343.75

-9.35

-2.65%

EMR

Emerson Electric Company

149.46

22.15

17.40%

Parker Hannifin

944.27

272.40

40.54%

ROK

Rockwell Automation

415.52

132.49

46.81%

ROP

Roper Technologies

416.14

-111.16

-21.08%

Glossary

BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

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.Date of analysis: Oct 27, 2025