ITW-Illinois Tool Q4 Earnings Surpass Estimates, Revenues Miss

Core Viewpoint - Illinois Tool Works Inc. (ITW) reported mixed financial results for the fourth quarter of 2024, with adjusted earnings per share exceeding estimates while revenues fell short of expectations Financial Performance - Fourth-quarter adjusted earnings were $2.54 per share, surpassing the Zacks Consensus Estimate of$ 2.49, representing a 7% year-over-year increase [1] - Revenues for the quarter were $3.9 billion, missing the consensus estimate of$ 4 billion, and decreased by 1.3% year over year due to a 1% unfavorable foreign currency translation [1] - For the full year 2024, net revenues totaled $15.9 billion, down 1.3% year over year, while adjusted earnings were$ 11.71 per share, reflecting a 20% increase year over year [2] Segmental Performance - Test & Measurement and Electronics revenues increased by 2.2% year over year to $747 million, below the estimate of$ 760.6 million [3] - Automotive Original Equipment Manufacturer revenues decreased by 3.7% year over year to $785 million, missing the estimate of$ 832.9 million [3] - Food Equipment revenues rose by 3% year over year to $672 million, slightly below the estimate of$ 682 million [4] - Welding revenues were $447 million, down 1% year over year, matching the estimate [4] - Construction Products revenues fell by 5% year over year to$ 438 million, below the estimate of $461.8 million [5] - Specialty Products revenues decreased by 5% year over year to$ 416 million, missing the estimate of $477.5 million [5] - Polymers & Fluids revenues declined by 2% year over year to$ 430 million, below the estimate of $459.3 million [5] Margin Profile - Cost of sales decreased by 3.9% year over year to$ 2.22 billion, while selling, administrative, and research and development expenses decreased by 0.5% year over year to $655 million [6] - Operating margin improved to 26.2%, up 140 basis points from the previous year, with enterprise initiatives contributing 120 basis points [6] Balance Sheet and Cash Flow - At the end of the fourth quarter, cash and equivalents were$ 948 million, down from $1.1 billion at the end of December 2023 [7] - Long-term debt remained stable at$ 6.31 billion compared to $6.3 billion at the end of December 2023 [7] - In 2024, net cash generated from operating activities was$ 3.28 billion, a decline of 7.3% year over year, with capital spending on plant and equipment at $437 million, down 4% year over year [8] - Free cash flow was$ 2.84 billion, decreasing by 7.8% year over year [8] 2025 Guidance - ITW expects earnings to be in the range of $10.15 to$ 10.55 per share, with organic revenues projected to increase by 0% to 2% [9] - Operating margin is anticipated to be between 26.5% and 27.5%, with enterprise initiatives expected to contribute approximately 100 basis points [9] - The company projects free cash flow to be 100% of net income and plans to repurchase about $1.5 billion worth of shares [9] - The expected tax rate is in the range of 24% to 24.5% [9]