Illinois Tool Works (ITW) Q4 2023 earnings summary

Executive summary

• FY23 revenue was $16.1B, up 1%, with 2% organic growth; operating income rose 7% to $4.0B and operating margin reached a record 25.1%.

• Q4 revenue grew 0.3% to $4.0B as organic revenue declined 0.5%; operating margin was 24.8%.

Financial highlights

• Q4 operating income was a record $988M; GAAP diluted EPS was $2.38, including a $0.04 unfavorable Argentina currency impact, or $2.42 excluding it.

• FY23 net income was $2.957B versus $3.034B; GAAP diluted EPS was $9.74, up 6% excluding $0.60 of FY22 divestiture gains.

• FY23 operating cash flow was $3.5B and record free cash flow was $3.1B, up 59%, with 104% conversion to net income.

• Q4 free cash flow was a record $908M, up 39%, with 127% conversion to net income; operating cash flow was $1.039B.

• Q4 reported revenue included a 0.4% divestiture headwind and 1.2% FX benefit.

Outlook and guidance

• FY24 revenue growth guidance is 2%–4%, including organic growth of 1%–3%; FX at current rates is expected to add ~1% to revenue.

• FY24 GAAP EPS guidance is $10.00–$10.40, with 5% growth at the midpoint; operating margin guidance is 25.5%–26.5%, with ~100 bps expansion at the midpoint.

• Enterprise initiatives are expected to contribute ~100 bps to FY24 margin; free cash flow conversion is expected to exceed 100% of net income, and after-tax ROIC is guided at 30%+.

• FY24 effective tax rate guidance is 24%–24.5%; planned share repurchases are $1.5B.

• FY24 organic growth projections: Automotive OEM, Food Equipment, Welding, and Polymers & Fluids 3%–5%; T&M/Electronics 2%–4%; Construction and Specialty Products (3)%–(1)%.