Illinois Tool Works (ITW) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenue was $4.0 billion, 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 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 and margin expansion in six of seven segments.

• Free cash flow conversion to adjusted net income reached 102% for the quarter.

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

Financial highlights

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

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

• Effective tax rate for Q3 was 14.9%, benefiting from discrete tax items.

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

• $375 million in share repurchases completed during the quarter.

Outlook and guidance

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

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

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

• After-tax ROIC expected to exceed 31%.

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