Illinois Tool Works Achieves Record Q2, Boosts Outlook

Illinois Tool Works Inc. (NYSE:ITW) on Wednesday reported better-than-expected second-quarter results and raised its full-year 2025 earnings guidance. Margin expansion and disciplined execution across its diversified industrial portfolio supported record quarterly performance.

The company posted second-quarter earnings of $2.58 per share, up from $2.54 a year ago and above the consensus estimate of $2.54.

Revenue rose 1% year-over-year to $4.10 billion, beating estimates of $4.0 billion, as flat organic growth was offset by favorable foreign currency translation.

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Operating income for the quarter totaled $1.07 billion, and the operating margin improved by 10 basis points to 26.3%, driven by a 130 basis-point contribution from enterprise initiatives. Segment-level margin performance reached a combined 27.1%.

The company achieved record-breaking second-quarter financial performance, with record EPS, operating income, and operating margin.

CEO Christopher O’Herlihy said the results reflected the strength of ITW’s business model and operating culture. “I’m encouraged by the strategic progress we’ve made in the first half of the year,” he said. “We’re confident in our ability to navigate an uncertain environment and deliver differentiated performance through 2025 and beyond.”

The company reported a varied performance across its diverse business segments, with most showing revenue growth and improved profitability.

The Automotive OEM segment stood out with $845 million in revenue, up 4% year-over-year, and a significant 190 basis point increase in operating margin to 21.3%. However, regional results diverged, with North America down 7%, Europe up 1%, and China surging by 22%.

Food Equipment continued its positive trend with $680 million in revenue, a 2% increase, and a 60 basis point margin improvement to 27.7%. North American sales grew 5%, while international markets declined 5%.

Test & Measurement/Electronics saw revenue rise 1% to $686 million, but operating margin contracted by 70 basis points to 22.8%. Organically, Test & Measurement fell 3%, while Electronics grew 4%.

The Welding segment posted solid performance with 3% revenue growth to $479 million and a 20 basis point margin improvement to 33.1%, retaining its position as the company’s highest-margin business.

Conversely, Construction Products faced the toughest challenges, with revenue down 6% to $473 million. Despite this, the segment improved its operating margin by 140 basis points to 30.8%. The construction slowdown was widespread, impacting North America (-7%), Europe (-5%), and Australia/New Zealand (-10%).

ITW generated $550 million in operating cash flow and $449 million in free cash flow during the quarter. The company repurchased $375 million of its stock and maintained a quarterly dividend of $1.50 per share. Cash and equivalents stood at $788 million as of June 30.

Outlook

Illinois Tool Works raised its 2025 GAAP EPS guidance to $10.35 to $10.55, compared with the prior range of $10.15 to $10.55 and ahead of the consensus estimate of $10.26.

The company reaffirmed expectations for 1% to 3% total revenue growth, with flat to 2% organic growth and operating margins between 26% and 27%.

ITW continues to expect free cash flow to exceed 100% of net income and plans to repurchase approximately $1.5 billion in shares during the year. The projected effective tax rate remains around 24%.

Price Action: ITW shares were trading lower by 1.98% to $254.35 at last check Wednesday.

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