Illinois Tool Works Q3 Earnings Miss Estimates, Lowers Guidance Due To Ongoing Automotive Industry Labor Actions

Illinois Tool Works Inc. ITW reported third-quarter FY23 revenue growth of 0.5% year-over-year to $4.031 billion, missing the consensus of $4.09 billion.

The operating income increased 9% Y/Y to $1.1 billion, and the operating margin was 26.5%, an increase of 200 bps.

GAAP EPS totaled $2.55, beating the consensus of $2.46.

ITW's operating cash flow was $982 million, and free cash flow was $856 million, an increase of 40%, with a conversion rate to net income of 111%. During the quarter, the company repurchased $375 million of its own shares and raised its dividend seven percent to an annualized $5.60 per share.

"Looking ahead at the balance of the year, while we anticipate some impact from ongoing automotive industry labor actions on our Automotive OEM segment in the fourth quarter, the company remains well-positioned to deliver another strong year of differentiated overall performance in 2023," commented E. Scott Santi, chairman and CEO.

FY23 Guidance: ITW narrowed the range of its full-year GAAP EPS guidance from $9.55-$9.95 per share to a range of $9.65-$9.85 per share (consensus: $9.75).

The company is projecting total revenue growth of 1%-2% with organic growth of 2%-3% based on current levels of demand exiting the third quarter, and the estimated fourth quarter impact of ongoing automotive industry labor actions.

Operating margin is projected to be in the range of 25%-25.5%, an improvement of 150 basis points at the mid-point.

Price Action: ITW shares traded lower by 0.21% at $221.99 on last check Tuesday.

Photo: Shutterstock