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Illinois Tool Works (ITW)
NYSE:ITW
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Illinois Tool Works (ITW) AI Stock Analysis

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ITW

Illinois Tool Works

(NYSE:ITW)

Rating:73Outperform
Price Target:
$285.00
â–²(5.79% Upside)
The overall score reflects a strong financial performance and positive earnings call sentiment, bolstered by strategic initiatives and growth in key segments. However, high leverage and recent cash flow challenges present risks.
Positive Factors
Manufacturing Strategy
ITW's tariff resilience is supported by its manufacturing strategy to 'produce where we sell'.
Margin Performance
ITW’s margin performance has been very consistent, delivering 46% incremental margins since 2016.
Tariff Impact
The company highlighted minimal tariff impact for Auto OEM, which was a positive surprise.
Negative Factors
Demand Weakness
Industry data support 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.
Organic Growth
End-market data suggests growth unlikely to accelerate, with organic growth and segment profit likely to fall short of Street expectations.

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

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 diversified portfolio of products and services across its various segments. The company primarily makes money by selling its manufactured goods, which include industrial equipment, components, and consumables tailored for specific industries. Key revenue streams come from sectors such as automotive, where they supply essential components, and food equipment, where they offer cooking and food processing machines. ITW also benefits from its strong focus on innovation, allowing for premium pricing on specialized products. The company has established significant partnerships with major industries, enhancing its market reach and enabling long-term contracts that provide a steady revenue flow. Additionally, ITW's operational efficiency and cost management strategies contribute to its profitability, as they help maintain healthy margins across its diverse offerings.

Illinois Tool Works Key Performance Indicators (KPIs)

Any
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:Main Street Data

Illinois Tool Works Earnings Call Summary

Earnings Call Date:Jul 30, 2025
(Q2-2025)
|
% Change Since: 3.82%|
Next Earnings Date:Oct 28, 2025
Earnings Call Sentiment Positive
The earnings call demonstrated strong operational performance with record margins and positive growth in key segments like China and Welding. However, challenges in North America, Europe, and the Construction Products segment tempered the overall performance. The company remains confident and raised its full-year guidance.
Q2-2025 Updates
Positive Updates
Record Operating Margin
The company achieved a record operating margin of 26.3% in Q2 2025, supported by enterprise initiatives contributing 130 basis points.
Strong Performance in China
Asia Pacific saw a 9% increase in revenue with impressive growth of 15% in China, driven significantly by a 22% growth in the automotive segment.
Raising Full Year Guidance
ITW raised its full-year GAAP EPS guidance by $0.10 at the midpoint, reflecting confidence in navigating challenging macro conditions.
Sequential Growth Across Segments
All seven segments grew revenue and expanded operating margins from Q1 to Q2, with three segments exceeding 30% margins.
Welding Segment Growth
The Welding segment delivered 3% organic growth, the highest in two years, supported by strong new product contributions.
Negative Updates
Organic Revenue Decline in North America and Europe
Organic revenue declined by 2% in North America and 3% in Europe, indicating challenges in these regions.
Challenges in Construction Products
The Construction Products segment faced global demand challenges, particularly in residential markets, with a 6% decline in revenue.
Polymers & Fluids Revenue Decline
Revenue in Polymers & Fluids declined by 3%, with organic revenue down 5% in polymers and 3% in both fluids and automotive aftermarket.
Modest Free Cash Flow Conversion
The free cash flow conversion rate was 59%, modestly below historical averages, attributed to the timing of certain onetime items.
Company Guidance
During the ITW's Second Quarter 2025 Earnings Conference Call, the company provided updated guidance for the full year. They are raising their full-year GAAP EPS guidance by $0.10 at the midpoint, now expected to range between $13.50 to $15.50. ITW anticipates total revenue growth of 1% to 3%, with organic growth expected to be between 0% and 2%. The company reported a second-quarter operating margin of 26.3% and achieved a GAAP EPS of $2.58. ITW is on track for a free cash flow conversion rate of over 100% for the year, despite a 59% conversion rate in Q2. The company highlighted strategic progress, particularly in customer-back innovation, with a goal to achieve a yield of 3% plus by 2030. They also noted strong sequential revenue growth, particularly in the Asia Pacific region with a 9% increase, including a 15% rise in China.

Illinois Tool Works Financial Statement Overview

Summary
Illinois Tool Works exhibits a strong profitability profile with solid margins and efficient cash generation. However, there are risks associated with its high leverage and recent declines in revenue and free cash flow.
Income Statement
75
Positive
Illinois Tool Works demonstrates solid profitability with a Gross Profit Margin of 43.7% and a Net Profit Margin of 21.3% for the TTM (Trailing-Twelve-Months). However, the slight decline in Total Revenue from the previous period indicates a potential challenge in revenue growth, with a negative growth rate of -0.7%. The company maintains a strong EBIT Margin of 26% and an EBITDA Margin of 30.5%, reflecting operational efficiency.
Balance Sheet
68
Positive
The company's Debt-to-Equity Ratio stands at 2.78, indicating a high level of leverage, which poses a financial risk, but is somewhat traditional in the industry. The Return on Equity (ROE) is robust at 104.8%, showcasing effective use of equity to generate profits. The Equity Ratio is relatively low at 22%, suggesting a higher reliance on debt financing compared to equity.
Cash Flow
72
Positive
Free Cash Flow to Net Income Ratio is strong at 0.53, indicating efficient cash generation relative to net income. However, the Free Cash Flow Growth Rate has declined by 37.4% compared to the previous period, highlighting potential challenges in maintaining cash flow levels. The Operating Cash Flow to Net Income Ratio of 0.6 suggests efficient conversion of net income into cash.
BreakdownTTMDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income Statement
Total Revenue15.79B15.90B16.11B15.93B14.46B12.57B
Gross Profit6.83B6.94B6.68B6.37B5.83B5.04B
EBITDA4.92B5.11B4.48B4.46B3.94B3.34B
Net Income3.37B3.49B2.96B3.03B2.69B2.11B
Balance Sheet
Total Assets16.05B15.07B15.52B15.42B16.08B15.61B
Cash, Cash Equivalents and Short-Term Investments788.00M948.00M1.06B708.00M1.53B2.56B
Total Debt8.94B8.08B8.37B7.95B7.88B8.31B
Total Liabilities12.84B11.75B12.51B12.33B12.45B12.43B
Stockholders Equity3.21B3.32B3.01B3.09B3.63B3.18B
Cash Flow
Free Cash Flow2.72B2.84B3.08B1.94B2.26B2.57B
Operating Cash Flow3.15B3.28B3.54B2.35B2.56B2.81B
Investing Cash Flow-7.00M-144.00M-403.00M-110.00M-984.00M-214.00M
Financing Cash Flow-3.21B-3.19B-2.78B-3.00B-2.56B-2.05B

Illinois Tool Works Technical Analysis

Technical Analysis Sentiment
Positive
Last Price269.41
Price Trends
50DMA
255.00
Positive
100DMA
247.24
Positive
200DMA
252.65
Positive
Market Momentum
MACD
2.46
Negative
RSI
63.73
Neutral
STOCH
64.09
Neutral
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 269.41 is above the 20-day moving average (MA) of 259.19, above the 50-day MA of 255.00, and above the 200-day MA of 252.65, indicating a bullish trend. The MACD of 2.46 indicates Negative momentum. The RSI at 63.73 is Neutral, neither overbought nor oversold. The STOCH value of 64.09 is Neutral, 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 (64)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
79
Outperform
$95.10B27.4427.42%0.89%-0.40%24.40%
73
Outperform
$73.21B27.9410.86%1.58%4.78%59.68%
73
Outperform
$38.17B39.8428.46%1.49%-8.23%-3.29%
73
Outperform
$76.94B23.16109.06%2.23%-1.40%11.65%
71
Outperform
$57.31B37.438.15%0.60%13.59%6.52%
69
Neutral
$69.30B50.2329.98%0.23%8.85%51.50%
64
Neutral
$10.71B16.037.42%2.02%2.57%-16.39%
* Industrials Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
ITW
Illinois Tool Works
269.41
26.65
10.98%
EMR
Emerson Electric Company
133.77
30.59
29.65%
PH
Parker Hannifin
752.33
167.14
28.56%
ROK
Rockwell Automation
351.19
87.64
33.25%
ROP
Roper Technologies
536.84
-6.68
-1.23%
HWM
Howmet Aerospace
171.00
74.63
77.44%

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
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: Aug 01, 2025