Illinois Tool Works Raises Outlook as Organic Growth Accelerates
Operating income reached a company-record $1.147 billion as margins widened.
Illinois Tool Works (ITW), the diversified industrial manufacturer, reported faster second-quarter revenue growth as demand strengthened in its capital-equipment businesses.
Organic revenue growth accelerated to 4.5% from 0.4% in the first quarter and 1.3% in the fourth quarter of 2024. North America led with 6.4% growth, marking a shift toward stronger underlying demand even as the benefit from foreign-currency translation declined to 1.4 percentage points from 3.9 points in the prior quarter.
Revenue rose 6.1% from a year earlier to $4.301 billion, accelerating from 4.6% growth in the first quarter. GAAP earnings increased 10.1% to $2.84 a share, though the pace slowed from 12% growth in the preceding quarter.
Welding led the advance with 13.9% organic growth, up from 6% in the first quarter, while Test & Measurement and Electronics doubled its growth rate to 10%. Polymers & Fluids grew 7.3%, while Automotive OEM declined 0.4% and Food Equipment was flat.
Profitability varied across those businesses. Test & Measurement and Electronics expanded its margin 240 basis points to 25.2%, and Polymers & Fluids widened its margin 160 basis points to 29.3%. Welding's margin contracted 70 basis points despite its revenue growth, while Food Equipment and Specialty Products recorded declines of 60 and 110 basis points, respectively.
Companywide operating margin expanded 40 basis points to 26.7%, lifting operating income 7.4% to the record level cited above. Enterprise initiatives contributed 120 basis points to margin, unchanged from the first quarter, while timing lags between inflation and price adjustments modestly diluted profitability even as price increases exceeded higher raw-material costs in dollar terms.
Illinois Tool Works now expects 2025 organic growth around a 3.5% midpoint, up from the prior range's 2% midpoint. The company also raised the midpoint of its GAAP earnings guidance by $0.15 to $11.45 a share, following a $0.10 increase after the first quarter.
Free cash flow rose 41% to $631 million, and conversion improved to 77% of net income from 59% a year earlier. After-tax return on average invested capital edged up to 29.7% even as average invested capital increased to $11.650 billion.