Mixed Signals For Illinois Tool Works: Q1 Profit Soars, Revenue Stumbles

Illinois Tool Works Inc. ITW shares are trading lower after the company reported first-quarter FY24 revenue of $3.97 billion, missing the consensus of $4.03 billion. 

Revenue declined 1% Y/Y as organic growth fell by 0.6%, with foreign currency translation impact reducing revenue by 0.4%.

GAAP EPS totaled $2.73, and Adjusted EPS totaled $2.44, beating the consensus of $2.36.

The operating income increased 16% Y/Y to $1.13 billion, and the operating margin came in at 28.4%, an increase of 420 bps Y/Y.

ITW’s operating cash flow was $589 million, and free cash flow was $494 million, with a conversion rate to net income of 68%. 

During the quarter, the company repurchased $375 million worth of shares.

FY24 Guidance: Illinois Tool Works raised GAAP EPS forecast by $0.30 to $10.30-$10.70 (consensus: $10.14).

The company also increased its operating margin outlook by 50 basis points Y/Y to 26% to 27%, with enterprise initiatives expected to contribute more than 100 basis points.

Christopher A. O’Herlihy, President and Chief Executive Officer, said, “Looking ahead, we expect current levels of demand across our end markets and favorable year-over-year comparisons will translate to positive organic growth through the balance of the year.”

The company still projects revenue growth of 2% to 4% and organic growth of 1% to 3% based on current levels of demand and foreign exchange rates.

Investors can gain exposure to the stock via VictoryShares THB Mid Cap ETF BEEZ and American Century U.S. Quality Value ETF VALQ. 

Price Action: ITW shares were down 1.5% at $245.45 at the last check Tuesday.