Core Insights - Illinois Tool Works Inc. (ITW) reported second-quarter 2025 adjusted earnings of $2.58 per share, exceeding the Zacks Consensus Estimate of $2.56, with a year-over-year increase of 1.6% [1] - Revenues for ITW reached $4.05 billion, surpassing the consensus estimate of $4.01 billion, reflecting a 1% year-over-year increase driven by favorable foreign currency translation [1] Segment Performance - Test & Measurement and Electronics revenues increased by 1.2% year over year to $686 million, exceeding the estimate of $670.4 million [2] - Automotive Original Equipment Manufacturer revenues rose by 3.8% year over year to $845 million, surpassing the estimate of $795.8 million [2] - Food Equipment generated revenues of $680 million, up 2.1% year over year, exceeding the estimate of $668.8 million [3] - Welding revenues increased by 2.9% year over year to $479 million, surpassing the estimate of $465.3 million [3] - Construction Products revenues declined by 6.1% year over year to $473 million, below the estimate of $502.4 million [4] - Specialty Products revenues increased by 1.1% year over year to $455 million, exceeding the estimate of $448.2 million [4] - Polymers & Fluids revenues declined by 3.4% year over year to $438 million, below the estimate of $446.3 million [4] Margin Profile - ITW's cost of sales increased by 0.4% year over year to $2.27 billion, while selling, administrative, and research and development expenses rose by 1% year over year to $693 million [5] - The operating margin was reported at 26.3%, an increase of 10 basis points from the previous year, with enterprise initiatives contributing 130 basis points to the margin [5] Balance Sheet and Cash Flow - At the end of Q2 2025, ITW had cash and equivalents of $788 million, down from $948 million at the end of December 2024 [6] - Long-term debt increased to $7.7 billion from $6.31 billion at the end of December 2024 [6] - In the first half of 2025, ITW generated net cash of $1.14 billion from operating activities, a decrease of 10.5% year over year [7] - Capital spending on plant and equipment was $197 million, down 6.6% year over year, with free cash flow reported at $945 million, down 11.1% year over year [7] 2025 Guidance - ITW raised its full-year 2025 financial guidance, expecting earnings in the range of $10.35-$10.55 per share, up from the previous range of $10.15-$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 100 basis points [8] - ITW projects free cash flow to exceed 100% of net income and plans to repurchase about $1.5 billion worth of shares [9]

Financial Data and Key Metrics Changes - Total revenue increased by 1%, with foreign currency translation contributing 1% while product line simplification (PLS) accounted for a 1% reduction [5][7] - GAAP EPS reached $2.58, operating income was $1.1 billion, and operating margin was 26.3%, all setting second quarter records [5][9] - Free cash flow generated was $449 million, representing a 59% conversion rate, with expectations to reach over 100% for the full year [9] Business Line Data and Key Metrics Changes - Automotive OEM revenue increased by 4%, with 2% organic growth, while strategic PLS reduced revenue by over 1% [10] - Food Equipment revenue rose by 2%, with 1% organic growth, driven by a 5% increase in North America [12] - Welding segment delivered 3% organic growth, with equipment sales increasing by 4% [15] - Polymers and Fluids revenue declined by 3%, with organic revenue down 5% in Polymers [16] - Construction Products revenue declined by 6%, but operating margin improved by 140 basis points to 30.8% [17] Market Data and Key Metrics Changes - North America experienced a 2% organic revenue decline, while Europe was down 3%, and Asia Pacific saw a 9% increase, with China growing by 15% [7][8] - Overall relevant markets are expected to decline in the low single digits in 2025, an improvement from previous projections [11] Company Strategy and Development Direction - The company is focused on customer back innovation to drive above-market organic growth, aiming for a 3% yield by 2030 [6] - The strategy includes executing enterprise initiatives to enhance operating margins and offset tariff costs [8][20] - The company raised its full-year guidance, projecting total revenue growth of 1% to 3% and organic growth of 0% to 2% [19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current uncertain environment and delivering differentiated performance through 2025 and beyond [6][21] - The company noted encouraging signs in end markets such as semiconductors and electronics, while consumer-oriented markets remain challenging [8][40] - Management highlighted the importance of enterprise initiatives and pricing actions in maintaining profitability [20][21] Other Important Information - The company expects all seven segments to grow revenue and improve margins in the second half of the year [20] - The guidance reflects a cautious approach due to the uncertain macro environment, with a focus on maintaining strong free cash flows [53] Q&A Session Summary Question: Inquiry about operating margin outlook - Management explained that while pricing actions to offset tariffs have been successful, they have been slightly margin dilutive, impacting the updated margin guidance [25][26] Question: Follow-up on the automotive segment - Management indicated that automotive margins are expected to remain solidly above 20% for the second half of the year, supported by enterprise initiatives [27][28] Question: Success outside of automotive for CBI - Management noted strong progress across all segments, particularly in welding, and confirmed that the CVI contribution is on track to meet targets [34][35] Question: FX implications in guidance - Management stated that current foreign exchange rates are expected to provide modest favorability, improving from earlier projections of a significant headwind [32] Question: Capital allocation and M&A strategy - Management emphasized a disciplined approach to M&A, focusing on high-quality acquisitions that align with long-term growth potential [82][83] Question: Restructuring and PLS impact - Management confirmed that restructuring spending is on track and that PLS continues to be a headwind to organic growth, but beneficial for future positioning [91][94]

Financial Data and Key Metrics Changes - Total revenue increased by 1%, with foreign currency translation contributing 1% and product line simplification (PLS) accounting for a 1% reduction [4][6] - GAAP EPS reached $2.58, operating income was $1.1 billion, and operating margin was 26.3%, all setting second quarter records [4][5] - Free cash flow generated was $449 million, representing a 59% conversion rate, slightly below historical averages but on track for over 100% conversion for the full year [9] Business Line Data and Key Metrics Changes - Automotive OEM revenue increased by 4%, with 2% organic growth, while North America declined by 7% and Europe grew by 1%, with China showing a remarkable 22% growth [10][12] - Food Equipment revenue rose by 2%, with North America growing 5% driven by equipment and service growth, while international sales declined by 5% [12][13] - Welding segment delivered 3% organic growth, with equipment sales up 4% and consumables growing 1% [15] - Polymers and Fluids revenue declined by 3%, with organic revenue down 5% in Polymers and 3% in Fluids [16] - Construction Products revenue decreased by 6%, with North America down 7% and Europe down 5%, but operating margin improved by 140 basis points to 30.8% [17] Market Data and Key Metrics Changes - North America experienced a 2% organic revenue decline, while Europe was down 3%, contrasting with a 9% increase in Asia Pacific, particularly a 15% increase in China [6][7] - The overall market outlook for 2025 is expected to be down in the low single digits, an improvement from previous projections [11] Company Strategy and Development Direction - The company is focused on customer back innovation to achieve above-market organic growth, with a goal of a 3% yield by 2030 [5] - The company raised its full-year guidance, indicating confidence in navigating the current environment and delivering differentiated performance [5][20] - All seven segments are projected to grow revenue and improve margins in the second half of the year [21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to outperform in uncertain environments, citing strong execution on controllable factors [5][22] - The company anticipates solid second-half financial performance with reasonable organic growth and substantial margin improvement [22] - Management noted that while price actions have been successful, they have been modestly dilutive to margins [25][26] Other Important Information - The company expects to maintain a disciplined approach to M&A, focusing on high-quality acquisitions that align with its growth strategy [81][82] - Restructuring expenses for the year are expected to be flat year-over-year, with $20 million spent in the first half and another $20 million planned for the second half [90][91] Q&A Session Summary Question: Inquiry about operating margin outlook - Management clarified that price actions to offset tariffs have been successful but slightly dilutive to margins, leading to updated margin guidance [25][26] Question: Follow-up on automotive segment margins - Management expressed satisfaction with the automotive segment's progress, expecting margins to remain solidly above 20% for the second half [28][29] Question: Success of customer back innovation (CBI) outside automotive - Management highlighted strong performance in welding and equipment segments, with CBI contributing positively to growth [35][36] Question: Foreign exchange impact on guidance - Management indicated that current foreign exchange rates are expected to provide modest favorability, improving from earlier projections of a significant headwind [33] Question: Capital allocation strategy and M&A pipeline - Management reiterated confidence in organic growth potential and a disciplined approach to M&A, focusing on high-quality opportunities [81][82] Question: Restructuring and PLS impact - Management confirmed that PLS remains a headwind to organic growth but is beneficial for future positioning [95] Question: Expectations for organic growth in the second half - Management stated that guidance is based on current demand levels, with no further acceleration factored in [114]

Core Insights - Illinois Tool Works (ITW) reported revenue of $4.05 billion for the quarter ended June 2025, reflecting a year-over-year increase of 0.7% and an EPS of $2.58, up from $2.54 in the same quarter last year [1] - The revenue exceeded the Zacks Consensus Estimate by 1.08%, while the EPS also surpassed the consensus estimate by 0.78% [1] Financial Performance - Operating Revenue - Total ITW showed organic growth of -0.4%, slightly better than the average estimate of -0.5% [4] - Operating Revenue - Automotive OEM achieved organic growth of 2.4%, compared to an estimated decline of -2.5% [4] - Operating Revenue - Food Equipment reported organic growth of 0.8%, exceeding the estimate of 0.5% [4] - Operating Revenue - Specialty Products had organic growth of 0.3%, surpassing the average estimate of -0.4% [4] Segment Performance - Operating Revenues for Automotive OEM reached $845 million, exceeding the average estimate of $790.6 million, with a year-over-year change of +3.7% [4] - Operating Revenues for Food Equipment were $680 million, compared to the average estimate of $666.24 million, reflecting a +2% year-over-year change [4] - Operating Revenues for Test & Measurement and Electronics stood at $686 million, above the average estimate of $672.53 million, with a +1.2% year-over-year change [4] - Operating Revenues for Polymers & Fluids were $438 million, slightly below the average estimate of $447.66 million, showing a -3.5% year-over-year change [4] - Operating Revenues for Construction Products were $473 million, compared to the average estimate of $492.87 million, indicating a -6.2% year-over-year change [4] - Operating Revenues for Specialty Products reached $455 million, exceeding the average estimate of $445.56 million, with a +1.3% year-over-year change [4] - Operating Revenues for Welding were $479 million, surpassing the average estimate of $467.18 million, reflecting a +2.8% year-over-year change [4] Stock Performance - Shares of Illinois Tool Works have returned +1.7% over the past month, while the Zacks S&P 500 composite has changed by +3.4% [3] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3]

Core Insights - Illinois Tool Works (ITW) reported quarterly earnings of $2.58 per share, exceeding the Zacks Consensus Estimate of $2.56 per share, and showing an increase from $2.54 per share a year ago [1][2] - The company achieved revenues of $4.05 billion for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 1.08% and slightly up from $4.03 billion year-over-year [3] Earnings Performance - The earnings surprise for the quarter was +0.78%, and ITW has surpassed consensus EPS estimates in all four quarters over the past year [2] - The previous quarter's earnings were also above expectations, with actual earnings of $2.38 per share compared to an estimate of $2.34 per share, resulting in a surprise of +1.71% [2] Stock Performance and Outlook - ITW shares have increased by approximately 2.3% since the beginning of the year, while the S&P 500 has gained 8.3% [4] - The current consensus EPS estimate for the upcoming quarter is $2.67, with expected revenues of $4.03 billion, and for the current fiscal year, the estimate is $10.30 on revenues of $15.91 billion [8] Industry Context - The Manufacturing - General Industrial industry, to which ITW belongs, is currently ranked in the top 10% of over 250 Zacks industries, indicating a favorable outlook [9] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact ITW's stock performance [6][9]

Q2 2025 Financial Performance - Revenue increased by 1% to $4.1 billion compared to Q2 2024[6] - Operating margin increased by 10 bps to 26.3% compared to Q2 2024[6] - GAAP EPS increased by 2% to $2.58 compared to Q2 2024[6] - Operating income increased by 1% to $1.07 billion compared to Q2 2024[6] - Sequential improvement with revenue up 6% to $4.1 billion, operating margin up 150 bps to 26.3%, GAAP EPS up 8% to $2.58, and operating income up 12% to $1.068 billion compared to Q1 2025[12] - Free cash flow was $449 million with a conversion rate of 59%, and share repurchases amounted to $375 million[10] Segment Performance - Automotive OEM revenue increased by 4% to $845 million, with operating margin increasing by 190 bps to 21.3%[14] - Food Equipment revenue increased by 2% to $680 million, with operating margin increasing by 60 bps to 27.7%[19] - Welding revenue increased by 3% to $479 million, with operating margin increasing by 20 bps to 33.1%[25] - Polymers & Fluids revenue decreased by 3% to $438 million, with operating margin decreasing by 50 bps to 27.7%[26] - Construction Products revenue decreased by 6% to $473 million, with operating margin increasing by 140 bps to 30.8%[30] - Specialty Products revenue increased by 1% to $455 million, with operating margin increasing by 70 bps to 32.6%[32] 2025 Financial Guidance - Revenue is expected to grow by 1-3% organically, reaching $16.0 - $16.4 billion[36] - Operating margin is projected to be 26.0-27.0%[36] - GAAP EPS is expected to be $10.35 - $10.55[36] - After-tax ROIC is expected to be 31%+[36] - Share repurchases of $1.5 billion are planned[41]

Exhibit 99.1 ITW Reports Second Quarter 2025 Results GLENVIEW, IL., July 30, 2025 - Illinois Tool Works Inc. (NYSE: ITW) today reported its second quarter 2025 results and updated guidance for full year 2025. "The ITW team outpaced underlying end market growth and delivered solid financial performance in the second quarter, achieving EPS of $2.58, operating income of $1.1 billion, and operating margin of 26.3 percent, all second-quarter records. Our results are a direct outcome of the strength of the ITW Bu ...

Core Insights - Illinois Tool Works Inc. (ITW) reported strong second quarter 2025 results, achieving record EPS of $2.58, operating income of $1.1 billion, and an operating margin of 26.3% [2][4][8] - The company raised its full year 2025 GAAP EPS guidance to a range of $10.35 to $10.55 per share, reflecting confidence in navigating market uncertainties [5][8] Financial Performance - Second quarter revenue reached $4.1 billion, a 1% increase, with organic growth remaining flat [3][8] - Operating cash flow was $550 million, and free cash flow was $449 million, representing a conversion rate of 59% to net income [4][34] - The effective tax rate for the quarter was 24.4% [4][26] Strategic Initiatives - The company emphasized its commitment to "Customer-Back Innovation" as a key driver for above-market organic growth [3] - ITW repurchased $375 million of its own shares during the quarter and plans to repurchase approximately $1.5 billion for the full year [4][5] Segment Performance - The automotive OEM segment generated $845 million in revenue with an operating margin of 21.3% [17] - The food equipment segment reported revenue of $680 million and an operating margin of 27.7% [17] - The welding segment achieved the highest operating margin at 33.1% with revenue of $479 million [17] Guidance and Outlook - ITW projects full year revenue growth of 1% to 3% and organic growth of flat to 2% [5] - Operating margin is expected to be in the range of 26% to 27%, with enterprise initiatives contributing at least 100 basis points [5]

Core Viewpoint - Illinois Tool Works Inc. (ITW) is expected to report second-quarter 2025 results on July 30, with earnings estimates showing a positive trend and a history of surpassing consensus estimates [1][14]. Revenue and Earnings Estimates - The consensus estimate for revenues is $4.01 billion, reflecting a 0.4% decrease from the previous year [2]. - Adjusted earnings are estimated at $2.56 per share, indicating a 0.8% increase year over year [2]. Segment Performance Expectations - The Food Equipment segment is anticipated to see a revenue increase of 0.3% year over year to $668.8 million, driven by growth in institutional markets and strong demand in Europe [3]. - The Welding segment's revenues are expected to decline by 0.1% to $465.3 million, impacted by softness in industrial markets despite recovery in Asia Pacific and the Middle East [4]. - The Specialty Products segment is projected to decrease by 0.2% to $448.2 million, affected by weakness in the filter medical business [6]. - The Polymers & Fluids segment is expected to decline by 1.7% to $446.3 million, influenced by softness in body and tire repair businesses [6]. - The Automotive OEM segment is forecasted to decrease by 2.3% to $795.8 million due to a lower North American auto build rate [7]. - The Test & Measurement and Electronics segment is expected to see a revenue drop of 1.1% to $670.4 million, impacted by declining demand in the semiconductor market [8]. - The Construction Products segment is projected to decrease by 0.3% to $502.4 million, affected by lower demand in commercial and residential markets [10]. Margin and Cost Management - ITW's gross margin is expected to increase by 70 basis points to 44.5% due to effective cost management and enterprise initiatives [7][9]. Earnings Prediction - ITW has an Earnings ESP of +1.19%, suggesting a potential earnings beat, with the most accurate estimate at $2.59 per share [12].

Market Overview - The U.S. markets have shown an upward trend, with the S&P 500 and Nasdaq Composite reaching all-time highs, increasing by 1.32% and 0.64% respectively last week [1] - Positive corporate earnings and expectations of easing tariffs and trade policies have bolstered investor confidence [1] - Concerns over inflation and signs of a potential economic slowdown are influencing the Federal Reserve's cautious stance on interest rates [1] Economic Indicators - The Conference Board's Leading Economic Indicator fell by 0.3% in June, indicating early signs of a slowdown, with weakened consumer expectations and fewer manufacturing orders [2] - The S&P Global's U.S. flash PMI data for July indicated an acceleration in business activity driven by the services sector, while the manufacturing PMI dropped to 49.5 [2] - Initial jobless claims decreased by 4,000 to 217,000 for the week ending July 19, suggesting a resilient labor market with limited layoffs [2] Stock Performance - AngloGold Ashanti plc's shares increased by 23.1% since its upgrade to Zacks Rank 1 on May 19, outperforming the S&P 500's 7.2% increase [3][4] - NN Group N.V. saw a return of 12.1% since its upgrade to Zacks Rank 1 on May 29, compared to the S&P 500's 8.4% increase [4] - Zacks Rank 1 stocks returned +6.51% in May 2025, outperforming the S&P 500's +4.47% [5] Portfolio Performance - A hypothetical portfolio of Zacks Rank 1 stocks has outperformed the S&P 500 index by more than 12 percentage points since 1988 [6] - The Zacks Focus List portfolio returned +8.84% in 2025 (through June 30) compared to +6.21% for the S&P 500 [14] - The Zacks Earnings Certain Admiral Portfolio (ECAP) returned +3.20% in Q1 2025, outperforming the S&P 500's -4.30% decline [18] Notable Stocks - Intellia Therapeutics, Inc. gained 60.3% over the past 12 weeks, while Caterpillar Inc. returned 41.3% in the same period [13][14] - OptimizeRx Corporation and Artisan Partners Asset Management saw increases of 18.2% and 14.6% respectively since their upgrades to Outperform [10] - Hershey Company returned 17.8% over the past 12 weeks, benefiting from investor interest in quality dividend stocks [20]