Illinois Tool Works Navigates Market Headwinds With Mixed Q3 Results And Revised EPS Outlook

Illinois Tool Works Inc. ITW shares are trading higher after the company reported mixed third-quarter 2024 results.

The company reported revenue of $3.966 billion, a decline of 1.6% year-over-year, missing the consensus of $4.017 billion.

The revenue saw a 1.4% drop in organic growth, a 0.4% foreign currency impact, and a 0.2% boost from acquisitions.

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Revenue By Segments:

• Automotive OEM $772 million (-3% YoY)
• Food Equipment $677 million (almost flat YoY)
• Test & Measurement and Electronics $697 million (flat YoY)
• Welding $462 million (-1% Y/Y)
• Polymers & Fluids $448 million (-2% Y/Y)
• Construction Products $479 million (-8% Y/Y) and
• Specialty Products $438 million (+6% Y/Y).

Adj. EPS for the quarter stood at $2.65, up 4% YoY, above the consensus of $2.53.

The operating income increased 1.7% YoY to $1.052 billion, and the operating margin was flat at 26.5%.

ITW's Operating cash flow was $891 million, and free cash flow was $783 million, with a conversion rate to adjusted net income of 102 percent.

The company repurchased $375 million worth of shares and raised its dividend seven percent to an annualized $6.00 per share.

ITW during the quarter sold its noncontrolling interest in Wilsonart, netting $395 million and a pre-tax gain of $363 million. A tax benefit contributed to a $1.26 favorable GAAP EPS impact, with minimal future impact expected.

"All year, our focused execution and operational excellence have enabled the Company to effectively counter persistent market headwinds and achieve solid growth in margin and profitability while we continued to manage and invest in ITW to maximize growth and performance over the long term" CEO Christopher A. O'Herlihy said.

ITW’s “long-term strategy” is to build above-market organic growth, O'Herlihy added.

2024 Guidance: Illinois Tool Works raised its GAAP EPS forecast to $11.63 to $11.73 from $10.30-$10.40 versus consensus of $10.29.

The company maintains its revenue and organic growth guidance to be approximately flat for 2024.

ITW operating margin guidance to 26.5%- 27% up 165 bps at midpoint, with enterprise initiatives adding over 100 bps. Free cash flow is expected to exceed 100% of net income, and the company plans to repurchase ~$1.5 billion in shares in 2024.

Price Action: ITW shares traded higher by 0.34% at $256.91 at the last check Wednesday.

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