First Quarter 2025 Earnings Conference Call April 30, 2025 Forward-Looking Statements Safe Harbor Statement This presentation and related conference call contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements may include, without limitation, statements regarding global supply chain challenges, expected impact of inflation including raw material inflation and rising interest rates, the potential impact of tariffs, the Company's projected ...

Core Insights - Illinois Tool Works Inc. (ITW) reported first quarter 2025 results, achieving financial outcomes ahead of expectations while maintaining guidance for the full year 2025 [1][2] Financial Performance - First quarter revenue was $3.8 billion, a decline of 3.4% year-over-year, with organic revenue down 1.6% [3][8] - GAAP EPS for Q1 2025 was $2.38, a decrease of 2% compared to the previous year, impacted by higher restructuring expenses and unfavorable foreign currency translation [5][8] - Operating margin for Q1 2025 was 24.8%, down 60 basis points from the previous year, with enterprise initiatives contributing positively [5][8] Cash Flow and Share Repurchase - Operating cash flow was $592 million, with free cash flow at $496 million, representing a conversion rate of 71% to net income [5][28] - The company repurchased $375 million of its own shares during the quarter and plans to repurchase approximately $1.5 billion in total for 2025 [5][6] 2025 Guidance - ITW is maintaining its full year 2025 GAAP EPS guidance range of $10.15 to $10.55 per share, expecting ongoing pricing actions to offset tariff cost impacts [6][8] - Projected revenue growth for 2025 is estimated at 0% to 2%, with operating margin expected to be between 26.5% and 27.5% [6][8] Segment Performance - Total operating revenue for the segments was $3.8 billion, with notable contributions from Automotive OEM ($786 million) and Food Equipment ($627 million) [16][17] - Organic revenue changes varied across segments, with Automotive OEM down 1.2% and Food Equipment up 1.2% [19]

Core Viewpoint - Illinois Tool Works Inc. (ITW) is expected to report first-quarter 2025 results on April 30, with a consensus estimate indicating a decrease in both revenues and adjusted earnings compared to the previous year [1][2][7] Revenue and Earnings Estimates - The consensus estimate for revenues is $3.84 billion, reflecting a 3.3% decline from the same quarter last year [2] - Adjusted earnings are estimated at $2.34 per share, which is a 4.1% decrease from the year-ago quarter [2] - Overall, total revenues are projected to be $3.9 billion, indicating a 2.6% year-over-year decrease, while adjusted earnings are expected to decline by 13.5% to $2.37 per share [7] Segment Performance Insights - The Test & Measurement and Electronics segment is likely to benefit from recovery in the MTS Test & Simulation business and the semiconductor end market [3] - Growth in institutional end markets in North America and increased demand in European warewash and cooking markets are expected to drive the Food Equipment segment [3] - The Polymers & Fluids segment is anticipated to perform well due to rising demand in Europe, particularly in the life sciences market [3] - The Specialty Products segment is projected to see revenues of $445.6 million, a 1.3% increase from the previous year, aided by strong performance in ground support equipment and consumer packaging [4] Challenges and Declines - The Automotive OEM segment is expected to face a revenue decline of 5.3% year-over-year to $772.8 million due to a decrease in North American auto build rates [5] - The Welding segment is also projected to see a revenue drop of 2.3% year-over-year to $465.1 million, attributed to declining demand in industrial and commercial markets [6] - Foreign currency headwinds are likely to negatively impact ITW's margins and profitability due to its significant international operations [6] Earnings Prediction - The company has a positive Earnings ESP of +0.15%, suggesting a potential earnings beat, with the most accurate estimate at $2.34 per share, slightly above the consensus estimate of $2.33 [8][9]

Core Viewpoint - Analysts expect Illinois Tool Works (ITW) to report quarterly earnings of $2.34 per share, reflecting a year-over-year decline of 4.1%, with revenues projected at $3.84 billion, down 3.3% from the previous year [1]. Earnings Projections - The consensus EPS estimate has been revised 0.2% higher over the last 30 days, indicating a collective reevaluation by analysts [1][2]. - Revisions to earnings projections are critical for predicting investor behavior and stock performance [2]. Revenue Estimates by Segment - 'Operating Revenues- Test & Measurement and Electronics' is estimated at $672.59 million, a decrease of 3.4% year-over-year [4]. - 'Operating Revenues- Construction Products' is projected at $452.05 million, indicating a decline of 7.4% from the prior year [4]. - 'Operating Revenues- Food Equipment' is expected to be $618.05 million, down 2.1% year-over-year [4]. - 'Operating Revenues- Specialty Products' is forecasted to reach $422.93 million, reflecting a 3.9% decrease [5]. - 'Operating Revenues- Automotive OEM' is anticipated at $782.57 million, showing a decline of 4.1% [5]. - 'Operating Revenues- Welding' is expected to be $460.45 million, down 3.3% year-over-year [5]. - 'Operating Revenues- Polymers & Fluids' is projected at $423.16 million, indicating a 2.1% decrease [6]. Operating Income Estimates - 'Operating Income- Automotive OEM' is expected to be $151.73 million, down from $162 million in the previous year [7]. - 'Operating Income- Food Equipment' is projected at $160.61 million, compared to $164 million last year [8]. - 'Operating Income- Test & Measurement and Electronics' is estimated at $158.07 million, down from $163 million in the same quarter last year [8]. Stock Performance - Shares of Illinois Tool Works have shown a return of -3.9% over the past month, compared to a -4.8% change in the Zacks S&P 500 composite [8].

Core Viewpoint - Wall Street anticipates a year-over-year decline in earnings for Illinois Tool Works (ITW) due to lower revenues, with a focus on how actual results will compare to estimates impacting stock price [1][2]. Earnings Expectations - ITW is expected to report quarterly earnings of $2.34 per share, reflecting a -4.1% change year-over-year, with revenues projected at $3.84 billion, down 3.4% from the previous year [3]. - The earnings report is scheduled for April 30, 2025, and could lead to stock price movement depending on whether results exceed or fall short of expectations [2]. Estimate Revisions - The consensus EPS estimate has been revised 0.03% lower in the last 30 days, indicating a slight reassessment by analysts [4]. - The Most Accurate Estimate for ITW is higher than the Zacks Consensus Estimate, resulting in a positive Earnings ESP of +1.52%, suggesting a bullish outlook from analysts [10][11]. Earnings Surprise Prediction - The Zacks Earnings ESP model indicates that a positive reading is a strong predictor of an earnings beat, especially when combined with a Zacks Rank of 1, 2, or 3 [8]. - ITW has a Zacks Rank of 3, which, along with the positive Earnings ESP, suggests a likelihood of beating the consensus EPS estimate [11]. Historical Performance - In the last reported quarter, ITW exceeded the expected earnings of $2.49 per share by delivering $2.54, resulting in a surprise of +2.01% [12]. - Over the past four quarters, ITW has consistently beaten consensus EPS estimates [13]. Industry Context - In the Zacks Manufacturing - General Industrial industry, Flowserve (FLS) is expected to report earnings of $0.59 per share, indicating a +1.7% year-over-year change, with revenues projected at $1.11 billion, up 1.9% [17]. - Flowserve's consensus EPS estimate has been revised 0.6% lower, resulting in a negative Earnings ESP of -0.56%, making it challenging to predict an earnings beat [18].

Core Insights - The industrial sector has experienced a decline since January 2025, particularly following the announcement of Trump's tariffs on April 2, which impacted industrial stocks significantly [1]. Group 1: Sector Performance - Industrial stocks were one of the four sectors within the S&P 500 that faced challenges due to external economic factors [1].

Group 1 - Illinois Tool Works Inc. (NYSE: ITW) is set to announce its Q1 '25 earnings on April 30 before the market opens [1] - The company is viewed as a long-term investment opportunity, with a typical investment horizon of 5-10 years [1] - The investment strategy focuses on a mix of growth, value, and dividend-paying stocks, with a particular emphasis on value [1]

Group 1 - The primary goal of the "High Income DIY Portfolios" Marketplace service is to provide high income with low risk and capital preservation for DIY investors [1] - The service offers seven portfolios designed for income investors, including retirees or near-retirees, featuring 3 buy-and-hold portfolios, 3 rotational portfolios, and a 3-bucket NPP model portfolio [1] - The portfolios include two high-income portfolios, two dividend growth investment (DGI) portfolios, and a conservative NPP strategy portfolio aimed at low drawdowns and high growth [1]

Company Overview - Illinois Tool Works Inc. (ITW) is a Fortune 300 global multi-industrial manufacturing leader with revenue of $15.9 billion in 2024 [2] - The company operates in seven industry-leading segments, utilizing the ITW Business Model to achieve solid growth with best-in-class margins and returns [2] - ITW employs approximately 44,000 dedicated colleagues worldwide, fostering a decentralized and entrepreneurial culture [2] Upcoming Financial Events - ITW will release its first quarter 2025 results on April 30, 2025, at 7:00 a.m. CDT [1] - Following the results release, ITW will hold a webcast at 9:00 a.m. CDT to discuss the earnings [1] - Access to the webcast and additional materials will be available on ITW's investor relations website [1]

Core Viewpoint - Illinois Tool Works (ITW) is a strong candidate for investors seeking stocks that consistently beat earnings estimates and are well-positioned for future performance [1] Company Performance - Illinois Tool Works has a solid track record of exceeding earnings estimates, particularly in the last two quarters, with an average surprise of 3.38% [2] - In the last reported quarter, the company achieved earnings of $2.54 per share, surpassing the Zacks Consensus Estimate of $2.49 per share by 2.01% [3] - In the previous quarter, ITW was expected to earn $2.53 per share but delivered $2.65 per share, resulting in a surprise of 4.74% [3] Earnings Estimates - Recent estimates for Illinois Tool Works have been trending upward, with a positive Zacks Earnings ESP (Expected Surprise Prediction) indicating a strong likelihood of an earnings beat [6][9] - The current Earnings ESP for ITW stands at +1.52%, reflecting increased analyst optimism regarding its near-term earnings potential [9] Predictive Metrics - Stocks with a positive Earnings ESP and a Zacks Rank of 3 (Hold) or better have a nearly 70% chance of producing a positive surprise [7] - The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate, suggesting that last-minute analyst revisions may provide more accurate predictions [8]