Illinois Tool Works (ITW) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue was $4.03B, down 1.2% year-over-year, with organic revenue essentially flat as demand moderated across segments.

• Operating income rose 4.5% to $1.05B, with a record operating margin of 26.2%, up 140 bps, driven by enterprise initiatives.

• GAAP EPS increased to $2.54, up 2–2.4% year-over-year; up 5% excluding a 2023 one-time tax item.

• Free cash flow was $571M, representing 75% conversion of net income.

• Demand environment moderated, but strong operational execution led to record profitability.

Financial highlights

• Operating margin improved to 26.2% in Q2 2024, up 140 bps year-over-year.

• After-tax ROIC for H1 2024 was 30.5%, including a 170 bps benefit from a change to FIFO accounting.

• Free cash flow for Q2 was $571M, with a 75% conversion to net income.

• Effective tax rate for Q2 was 24.4%, up from 21.4% last year.

• Q2 gross margin improved to 43.8% from 42.5% year-over-year.

Outlook and guidance

• Full-year 2024 GAAP EPS guidance narrowed to $10.30–$10.40, up 6–7% year-over-year at midpoint.

• Revenue and organic growth for 2024 expected to be flat; operating margin guidance raised to 26.5–27%.

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

• Effective tax rate projected at 24–24.5%.

• No improvement expected in short-cycle demand for the remainder of the year.