Illinois Tool Works Q2: Revenue Miss, Raised FY23 EPS Outlook & More

Illinois Tool Works Inc ITW reported second-quarter FY23 revenue growth of 1.6% year-over-year to $4.07 billion, +3% on an organic basis, missing the consensus of $4.13 billion.

Revenue Growth by Segments: Food Equipment +6% Y/Y, Welding +1%; Construction Products -7%, Polymers & Fluids -8%, Automotive OEM +16% Y/Y; Test & Measurement and Electronics +1% Y/Y; and Specialty Products -5% Y/Y.

The operating income increased 9% Y/Y to $1.01 billion, and the operating margin was 24.8%, up 170 bps.

EPS improved 9% Y/Y to $2.41, beating the consensus of $2.39.

ITW’s operating cash flow was $790 million, and free cash flow was $705 million (+68% Y/Y), with a conversion rate to net income of 94%. 

“While customer and channel inventory normalization will continue to be a factor for the next several quarters, we expect stable underlying demand and continued strong margin and profitability performance through the balance of the year. As a result, we are raising our full-year 2023 GAAP EPS guidance by $0.10 at the midpoint,” commented E. Scott Santi, Chairman and Chief Executive Officer.

FY23 Guidance: ITW continues to expect total revenue growth of 2%-4% with 3%-5% organic growth.

ITW raised GAAP EPS guidance to $9.55-$9.95 from $9.45-$9.85 versus the $9.66 consensus.

It still expects an operating margin of 24.5% - 25.5%, with enterprise initiatives contributing 100 bps. It plans to repurchase ~$1.5 billion of its shares.

Price Action: ITW shares traded lower by 5.38% at $249.15 on the last check Tuesday.