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Financial Performance - Operating revenue for Q3 2025 was $4.059 billion, a 2.3% increase from $3.966 billion in Q3 2024[105] - Operating income for Q3 2025 was $1,112 million, reflecting a 5.7% increase compared to $1,052 million in Q3 2024[108] - Year-to-date operating revenue for 2025 was $11,951 million, a slight decline of 0.1% from $11,966 million in 2024[108] - Year-to-date operating income decreased by 3.2% to $3,131 million from $3,233 million in 2024[108] - Net income for Q3 2025 was $821 million, a decrease of 29.2% from $1,160 million in Q3 2024; year-to-date net income for 2025 was $2,276 million, down from $2,738 million in 2024[144] Revenue Segmentation - Organic revenue increased by 0.7% in Q3 2025, driven by growth in Automotive OEM, Welding, Specialty Products, and Food Equipment segments[108] - North American organic revenue was flat in Q3 2025, with a 1.7% decline year-to-date[108] - Asia Pacific organic revenue increased by 6.7% in Q3 2025, primarily due to growth in the Automotive OEM segment[108] - Automotive OEM segment operating revenue for Q3 2025 was $830 million, a 7.3% increase from $772 million in Q3 2024[111] - Food Equipment segment operating revenue for Q3 2025 was $694 million, a 2.5% increase from $677 million in Q3 2024[112] - Test & Measurement and Electronics segment operating revenue for Q3 2025 was $698 million, a slight increase of 0.3% from $697 million in Q3 2024[115] - Organic revenue for the Polymers & Fluids segment declined by 3.1% in Q3 2025, with a notable decrease in demand in Europe and North America[128] Expenses and Margins - Cost of revenue for Q3 2025 was $2.253 billion, representing 55.5% of operating revenue, down from 56.2% in Q3 2024[105] - Selling, administrative, and research and development expenses were $676 million in Q3 2025, flat as a percentage of operating revenue compared to Q3 2024[106] - Operating margin for the Food Equipment segment improved to 29.2% in Q3 2025, up 80 basis points from 28.4% in Q3 2024[112] - Operating margin for the Test & Measurement and Electronics segment was 25.4% in Q3 2025, down 30 basis points from 25.7% in Q3 2024[115] - Operating margin improved to 31.6% in Q3, up 140 basis points, driven by enterprise initiatives despite higher employee-related expenses[132] Tax and Earnings - The effective tax rate for Q3 2025 was 21.8%, up from 14.9% in Q3 2024, influenced by discrete tax benefits and expenses[110] - Diluted earnings per share (EPS) for Q3 2025 was $2.81, a decrease of 28.1%, or an increase of 6.0% excluding the impact of the Wilsonart transaction[110] - After-tax ROIC for Q3 2025 was 29.8%, compared to 30.0% in Q3 2024, while year-to-date After-tax ROIC for 2025 was 29.1%, down from 31.3% in 2024[144] Cash Flow and Capital Management - Free cash flow for Q3 was $904 million, up from $783 million in the prior year, while year-to-date free cash flow was $1,849 million[142] - The company maintained $924 million in cash and equivalents as of September 30, 2025, with no outstanding borrowings under its $3.0 billion revolving credit facility[139] - Common stock repurchases amounted to $1,125 million during the same period, indicating a significant return of capital to shareholders[155] - Dividends declared totaled $1,344 million, further impacting the reduction in stockholders' equity[155] Acquisitions and Investments - The company completed two acquisitions in the Test & Measurement and Electronics segment for a total of $116 million in early 2024[98] - The Company completed an acquisition in the Test & Measurement and Electronics segment for $59 million on April 1, 2024[118] Innovation and Strategy - The company aims to achieve high-quality organic growth through customer-back innovation, focusing on key customer relationships[90] - The company has approximately 20,900 granted and pending patents, reflecting its commitment to innovation[86] - The strategic sourcing initiative has delivered an average of 1% reduction in spend each year since 2013[95] - The company is focused on enterprise strategy initiatives, although their effectiveness on organic revenue growth remains uncertain[157] Risks and Challenges - The company anticipates potential impacts from global supply chain challenges and U.S. trade policy on future performance[156] - Risks include fluctuations in foreign currency, which could adversely affect financial results[157] - There are ongoing considerations regarding the introduction of new products and the protection of intellectual property, which are critical for future growth[157] - The company has not reported any material changes to market risk exposures since the 2024 Annual Report[160]

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Core Insights - Illinois Tool Works Inc. (ITW) reported third-quarter 2025 adjusted earnings of $2.81 per share, exceeding the Zacks Consensus Estimate of $2.56, with a year-over-year increase of 6% [1][10] - Revenues for ITW were $4.06 billion, slightly missing the consensus estimate of $4.08 billion, but reflecting a 2% year-over-year growth, aided by a favorable foreign currency translation of 2% [1][10] - Organic sales increased by 1% in the quarter, while product line simplification negatively impacted sales by 1% [1] Segment Performance - Test & Measurement and Electronics revenues were $698 million, remaining flat year over year, below the estimate of $712.9 million [2] - Automotive Original Equipment Manufacturer revenues rose by 7% year over year to $830 million, slightly below the estimate of $805.8 million [2] - Food Equipment generated revenues of $694 million, up 3% year over year, but below the estimate of $701.9 million [3] - Welding revenues were $477 million, also up 3% year over year, slightly missing the estimate of $481.8 million [3] - Construction Products revenues decreased by 1% year over year to $473 million, slightly below the estimate of $476.5 million [4] - Specialty Products revenues increased by 3% year over year to $452 million, exceeding the estimate of $450.3 million [4] - Polymers & Fluids revenues declined by 2% year over year to $441 million, missing the estimate of $452.4 million [4] Margin Profile - Cost of sales increased by 1% year over year to $2.25 billion, while selling, administrative, and research and development expenses rose by 2.7% to $676 million [5] - The operating margin improved to 27.4%, an increase of 90 basis points from the previous year, with enterprise initiatives contributing 140 basis points to this margin [5][10] Balance Sheet and Cash Flow - At the end of Q3 2025, ITW had cash and equivalents of $924 million, down from $948 million at the end of December 2024 [6] - Long-term debt increased to $7.68 billion from $6.31 billion at the end of December 2024 [6] - In the first nine months of 2025, ITW generated net cash of $2.16 billion from operating activities, a decrease of 0.2% year over year [7] - Capital spending on plant and equipment was $314 million, down 1.6% year over year, with free cash flow at $1.85 billion, a decrease of 0.1% year over year [7] 2025 Guidance - ITW updated its full-year 2025 financial guidance, expecting earnings in the range of $10.40 - $10.50 per share, slightly adjusted from the previous range of $10.35 - $10.55 [8] - Revenues are anticipated to increase by 1-3%, with organic revenues expected to rise by 0-2% [8] - The operating margin is projected to be between 26% and 27%, with enterprise initiatives expected to contribute approximately 125 basis points [8] - Free cash flow is projected to be approximately 100% of net income, with plans to repurchase about $1.5 billion worth of shares [9]

Financial Data and Key Metrics Changes - Revenue increased by 3% in Q3 2025, with organic growth at 1% and a 1% reduction due to strategic product line simplification efforts [3][4] - GAAP EPS reached $2.81, operating income grew by 6% to a record $1.1 billion, and operating margin improved by 90 basis points to 27.4% [3][4][8] - Free cash flow grew by 15% to over $900 million, with a conversion rate of 110% [8] Business Line Data and Key Metrics Changes - Automotive OEM segment revenue increased by 7%, with organic growth of 5%, and operating margin improved by 240 basis points to 21.8% [10] - Food equipment revenue increased by 3%, with 1% organic growth, and operating margins improved by 80 basis points to 29.2% [11] - Test & measurement and electronics revenue was flat, with a 1% decline in organic revenue, but operating margin improved by 260 basis points to 25.4% [12] - Welding segment delivered 3% organic growth, with operating margin at 32.6%, up 30 basis points [12] - Polymers & fluids revenue declined by 2%, with organic revenue down 3%, but operating margin improved by 60 basis points to 28.5% [13] - Construction products revenue decreased by 1%, with organic revenue down 2%, but operating margin improved by 140 basis points to 31.6% [13] Market Data and Key Metrics Changes - North America organic revenue was flat, Europe down 1%, while Asia Pacific saw a 7% increase, including 10% growth in China [6][10] - China automotive business grew significantly, with a 15% increase year-to-date, driven by customer-backed innovation [55] Company Strategy and Development Direction - The company remains focused on above-market organic growth powered by customer-backed innovation, aiming for a yield of 3% plus by 2030 [4][17] - The strategy includes ongoing product line simplification to enhance portfolio quality and profitability [10][66] - The company is committed to increasing annual cash returns to shareholders, with a 7% dividend increase announced [4][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating a challenging macro environment, emphasizing the resilience of the diversified portfolio [17] - The company is narrowing its EPS guidance range to $10.40 to $10.50, reflecting a lower projected tax rate and current demand levels [16][17] - Management noted that while the demand environment remains mixed, they are positioned for above-market growth as the cycle turns [75] Other Important Information - The company has repurchased over $1.1 billion of outstanding shares year-to-date [4] - The effective tax rate for the quarter was 21.8%, influenced by a benefit from the 2024 U.S. tax return filing [8] Q&A Session Summary Question: Insights on construction business margins - Management attributed margin improvements in construction to the quality of the portfolio and effective execution in attractive market segments [22][23] Question: Expectations for test & measurement in Q4 - Management anticipates a cyclical improvement in Q4, with expectations of better order activity and a recovery from previous slowdowns [25] Question: Clarification on organic revenue growth guidance - Management indicated that the guidance remains cautious due to choppy demand, with expectations for a sequential improvement in Q4 driven by test & measurement [29][30] Question: Impact of tariffs on pricing and demand - Management noted that tariffs are no longer the main concern, with the focus shifting to managing costs and demand uncertainties [72][73] Question: Long-term growth outlook and market positioning - Management expressed confidence in long-term market attractiveness and the company's positioning for growth when the cycle turns [75]

Core Insights - Illinois Tool Works (ITW) reported revenue of $4.06 billion for the quarter ended September 2025, reflecting a year-over-year increase of 2.3% [1] - Earnings per share (EPS) for the quarter was $2.81, up from $2.65 in the same quarter last year, resulting in an EPS surprise of +4.46% against the consensus estimate of $2.69 [1] Revenue Performance - The reported revenue was slightly below the Zacks Consensus Estimate of $4.08 billion, showing a surprise of -0.55% [1] - Organic growth in total ITW was 0.7%, lower than the estimated 2.1% by analysts [4] - Specific segments showed varied performance: - Automotive OEM: $830 million, +7.5% year-over-year, exceeding the estimate of $809.03 million [4] - Food Equipment: $694 million, +2.5% year-over-year, below the estimate of $703.32 million [4] - Specialty Products: $452 million, +3.2% year-over-year, slightly above the estimate of $449.34 million [4] - Test & Measurement and Electronics: $698 million, +0.1% year-over-year, below the estimate of $718.59 million [4] - Construction Products: $473 million, -1.3% year-over-year, close to the estimate of $474.83 million [4] - Polymers & Fluids: $441 million, -1.6% year-over-year, below the estimate of $447.95 million [4] Stock Performance - Over the past month, shares of Illinois Tool Works have returned -0.2%, while the Zacks S&P 500 composite increased by +1.3% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market [3]

Core Viewpoint - Illinois Tool Works (ITW) reported quarterly earnings of $2.81 per share, exceeding the Zacks Consensus Estimate of $2.69 per share, and showing an increase from $2.65 per share a year ago [1][2] Financial Performance - The earnings surprise for the quarter was +4.46%, with the company having surpassed consensus EPS estimates in all four of the last quarters [2] - Revenues for the quarter were $4.06 billion, slightly missing the Zacks Consensus Estimate by 0.55%, and up from $3.97 billion year-over-year [3] - The company has only topped consensus revenue estimates once in the last four quarters [3] Stock Performance and Outlook - ITW shares have increased approximately 1.5% since the beginning of the year, while the S&P 500 has gained 14.6% [4] - The future performance of the stock will largely depend on management's commentary during the earnings call and the earnings outlook [4][5] Earnings Estimates - The current consensus EPS estimate for the upcoming quarter is $2.73 on revenues of $4.06 billion, and for the current fiscal year, it is $10.38 on revenues of $16.03 billion [8] Industry Context - The Manufacturing - General Industrial industry, to which ITW belongs, is currently ranked in the bottom 41% of over 250 Zacks industries, indicating potential challenges ahead [9]

Q3 2025 Financial Highlights - Revenue increased to $4.1 billion, a 2% increase compared to Q3 2024[6] - Organic revenue grew by 1%[6] - Operating income increased by 6% to $1.11 billion[6] - Operating margin improved by 90 bps to 27.4%[6] - GAAP EPS increased by 6% to $2.81[6] - Free cash flow conversion rate was 110%[10] Segment Performance - Automotive OEM revenue increased by 7% to $830 million, with a 240 bps increase in operating margin to 21.8%[14] - Food Equipment revenue increased by 3% to $694 million, with a 80 bps increase in operating margin to 29.2%[17] - Welding revenue increased by 3% to $477 million, with a 30 bps increase in operating margin to 32.6%[23] 2025 Financial Guidance - The company expects GAAP EPS to be in the range of $11.71[32] - The company expects organic revenue to grow by 1-3%[32] - The company expects free cash flow conversion to be approximately 100%[32] - Share repurchases of ~$1.5 billion[36]

Financial Performance - Third quarter revenue reached $4.1 billion, an increase of 2% with organic growth of 1%[4] - GAAP EPS was $2.81, a 6% increase year-over-year excluding a divestiture gain from the prior year[5] - Operating margin improved to a record 27.4%, an expansion of 90 basis points, with enterprise initiatives contributing 140 basis points[5] - Free cash flow increased by 15% to $904 million, with a conversion rate of 110% to net income[5] - The net income for Q3 2025 was $821 million, down from $1,160 million in Q3 2024, reflecting a decrease in earnings per share due to amortization expenses[22] - Net income for the twelve months ended December 31, 2024, was $3,488 million, with an operating income after taxes of $3,246 million[26] - Adjusted net income per share for the twelve months ended December 31, 2024, was $10.15, after accounting for the impact of the sale of noncontrolling interest in Wilsonart[30] - The company reported a net income of $2,738 million for the nine months ended September 30, 2024[28] Guidance and Projections - The company is narrowing its full year 2025 GAAP EPS guidance range to $10.40 to $10.50 per share[6] - Projected overall revenue growth for 2025 is 1% to 3%, incorporating organic growth of flat to 2%[6] - Operating margin for 2025 is projected to be in the range of 26% to 27%, with a contribution of 125 basis points or more from enterprise initiatives[6] - The company plans to repurchase approximately $1.5 billion of its own shares in 2025[6] Tax and Cash Flow - The effective tax rate for the quarter was 21.8%[5] - The company reported a net discrete tax benefit of $27 million for Q3 2025, impacting the effective tax rate to 21.8%[23] - The effective tax rate for the nine months ended September 30, 2025, was 24.3%, consistent with the previous year[23] - The effective tax rate for the year ended December 31, 2024, was 23.8%, adjusted for a net discrete tax benefit of $121 million related to the third quarter[26] - Free cash flow for the twelve months ended December 31, 2024, was $2,844 million, with a free cash flow to net income conversion rate of 82%[28] - The net cash provided by operating activities to net income conversion rate was 94% for the twelve months ended December 31, 2024[28] - The company reported a net cash provided by operating activities of $3,281 million for the twelve months ended December 31, 2024[28] Segment Performance - Q3 2025 operating revenue increased by 7.3% in Automotive OEM, while Food Equipment saw a 2.5% increase, and Test & Measurement grew by 3.3%[19] - The total operating margin for Q3 2025 was 27.4%, with Automotive OEM at 21.8% and Food Equipment at 29.2%[19] - Year-to-date (YTD) 2025 operating revenue for Automotive OEM grew by 2.4%, while Food Equipment increased by 1.3%, but Test & Measurement declined by 1.6%[21] - The total operating margin change for YTD 2025 was a decrease of 80 basis points, with significant impacts from restructuring and other costs[21] - The company experienced a 2.0% organic revenue growth in Automotive OEM for YTD 2025, while Polymers & Fluids saw a decline of 5.6%[21] Investment and Capital - The average invested capital for the nine months ended September 30, 2025, was $10,863 million, with a return on invested capital of 29.1%[22] - Average invested capital was $10,419 million, resulting in a net income to average invested capital ratio of 33.5% and an after-tax return on average invested capital of 31.2%[26] - Total invested capital as of December 31, 2024, was $10,232 million[26]

Core Insights - Illinois Tool Works Inc. (ITW) reported solid operational and financial performance for Q3 2025, with an EPS of $2.81, a 6% year-over-year increase excluding divestiture gains, and a record operating margin of 27.4% [2][4][8] - The company achieved a revenue of $4.1 billion, reflecting a 2% increase, driven by a 1% organic revenue growth and a 2% positive impact from foreign currency translation [3][8] - ITW is narrowing its full-year 2025 GAAP EPS guidance to a range of $10.40 to $10.50, projecting overall revenue growth of 1% to 3% [5][8] Financial Performance - Q3 2025 revenue reached $4.1 billion, up 2% from the previous year, with organic growth contributing 1% [3][8] - Operating income increased to $1.1 billion, a 6% rise, with an operating margin improvement of 90 basis points to 27.4% [4][8] - Free cash flow rose by 15% to $904 million, with a conversion rate of 110% to net income [4][8] Strategic Initiatives - The company emphasized its focus on Customer-Back Innovation, which is driving consistent above-market organic growth [3][5] - ITW plans to repurchase approximately $1.5 billion of its own shares and has raised its dividend by 7%, marking the 62nd consecutive year of dividend increases [4][5] Segment Performance - The Automotive OEM segment generated $830 million in revenue with an operating margin of 21.8% [17] - The Food Equipment segment reported $694 million in revenue and a 29.2% operating margin [17] - The Welding segment achieved a revenue of $477 million with a robust operating margin of 32.6% [17] Guidance and Outlook - The company anticipates overall revenue growth of 1% to 3% for 2025, with organic growth expected to be flat to 2% [5][8] - Operating margin is projected to be between 26% and 27%, with a contribution of 125 basis points or more from enterprise initiatives [5][8]