Illinois Tool Works (ITW) Q1 2025 earnings summary

Executive summary

• Q1 2025 revenue was $3.84 billion, down 3.4% year-over-year, with organic revenue declining 1.6% but flat on an equal-day basis; GAAP EPS was $2.38, ahead of plan, though down year-over-year due to the absence of a prior LIFO benefit and higher restructuring and FX headwinds.

• Operating margin was 24.8%, down from 28.4% due to the absence of a $117 million LIFO benefit; Enterprise Initiatives contributed 120 bps.

• Free cash flow was $496 million, with a 71% conversion rate; $375 million in share repurchases completed.

• Net income for Q1 2025 was $700 million, a 14.5% decrease from Q1 2024.

• Maintained focus on strategic priorities, including above-market organic growth, customer-backed innovation, and leveraging a diversified portfolio to mitigate tariff impacts.

Financial highlights

• Revenue was $3.84 billion, down 3.4% year-over-year; organic revenue down 1.6%, flat on an equal-day basis.

• Operating margin at 24.8% for Q1, down 360 bps year-over-year due to the non-repeat of a LIFO benefit.

• Free cash flow of $496 million, with a 71% conversion rate.

• Effective tax rate was 21.7%, including a $21 million discrete tax benefit from reversal of valuation allowances.

• Dividend per share paid in Q1 2025 was $1.50.

Outlook and guidance

• Full-year 2025 GAAP EPS guidance maintained at $10.15–$10.55; organic growth projected at 0–2%, with pricing actions expected to offset tariff impacts.

• Operating margin expected in the 26.5–27.5% range, with Enterprise Initiatives contributing 100+ bps.

• Free cash flow expected to exceed 100% of net income; $1.5 billion in share repurchases planned for 2025.

• Projected effective tax rate for 2025 is approximately 24%.

• After-tax ROIC projected at 31%+ for 2025.