Illinois Tool Works (ITW) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenue was $4.0B, down 2% year-over-year, with organic revenue down 1% as demand moderated across most segments, especially automotive and construction.

• GAAP EPS rose 53% to $3.91, including a $1.26 per share gain from the Wilsonart divestiture; adjusted EPS was $2.65, up 4%.

• Operating margin held at 26.5%, with enterprise initiatives contributing 130 basis points; three segments achieved margins above 30%.

• Free cash flow conversion to adjusted net income reached 102% for Q3, with free cash flow at $783M.

• Dividend increased by 7% to $6.00 annualized, marking the 61st consecutive year of increases.

Financial highlights

• Operating income for Q3 was $1.05B; net income was $1.16B.

• Free cash flow was $783M; operating cash flow was $891M.

• Effective tax rate for Q3 was 14.9%, benefiting from discrete tax items; adjusted core tax rate was 23.7%.

• After-tax ROIC for Q3 was 43.4%; for the nine months, 34.9%.

• 1.5M shares repurchased in Q3 for $375M; $1.1B+ repurchased year-to-date.

Outlook and guidance

• Full-year GAAP EPS guidance raised by $1.33 to $11.63–$11.73, reflecting the divestiture gain and lower tax rate; adjusted EPS guidance is $10.37–$10.47.

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

• Free cash flow expected to be about 100% of adjusted net income; $1.5B in share repurchases planned for 2024.

• After-tax ROIC expected to exceed 31% for the year.

• No improvement expected in near-term demand; guidance based on current demand and FX rates.