Illinois Tool Works Inc.
ITW · NYSE
Next quarter
Expected to report Feb 2, 2027 — estimated from last year’s reporting date.
Consensus is $2.97 EPS for Dec 2026 across 6 estimates, ranging $2.86 to $3.02.
ITW Sep 2026
- 0.33%
- $2.99
- $3.00
- —
- $4.24B
Reported results
- $4.24B
- 53.64%
- $1.18B
- 27.79%
- $855.00M
- $3.00
Highlights
- EPS and sales: Q3 diluted EPS was $3.00, up 6.8% year over year and 0.3% above the $2.99 consensus; revenue rose 4.4% to $4.236 billion, including 3.8% organic growth.
- Record profitability: Operating income reached a quarterly record of $1.177 billion, up 5.9% year over year, and operating margin expanded 40 basis points to 27.8%.
- Growth leaders: Test & Measurement and Electronics organic revenue grew 15.8%, Polymers & Fluids 8.2%, and Welding 6.9%; management cited accelerating demand in capex-related markets.
- Welding disruption: A tornado damaged two facilities and reduced Q3 revenue by an estimated $40 million; excluding the impact, Welding organic growth would have been about 15% and company organic growth about 5%.
- Guidance raised: ITW lifted full-year 2026 GAAP EPS guidance by $0.05 at the midpoint to $11.45–$11.55, implying 10% growth, and raised revenue growth guidance to 4.5%–5.5%; organic growth guidance remains 3%–4%.
- Cash generation: Operating cash flow was $953 million and free cash flow $851 million, equal to 100% of net income; year-to-date free cash flow was $2.010 billion versus $1.849 billion a year earlier.
- Shareholder returns: ITW repurchased $187 million of stock in Q3, raised its dividend 7% to an annualized $6.88 per share, and expects about $1.5 billion of 2026 repurchases.
- IRS notice: The company plans to challenge an IRS deficiency notice covering 2018–2021 that assesses $23 million of tax plus interest and penalties and disallows $47 million of refund claims; related taxes for later years total $148 million.
Analysis
ITW delivered a modest EPS beat and a stronger operating quarter: diluted EPS of $3.00 was just above the $2.99 consensus and grew 6.8% from $2.81 a year earlier. Revenue of $4.236 billion increased 4.4% year over year, with 3.8% organic growth, while operating income rose 5.9% to a record $1.177 billion. Sequentially, revenue eased from $4.30 billion in Q2, while EPS advanced from $2.84 to $3.00. The central feature was improving organic demand and profitability, led by Test & Measurement and Electronics, Polymers & Fluids, and Welding, despite mixed conditions elsewhere in the portfolio.
Margin expanded 40 basis points year over year to 27.8%; enterprise initiatives contributed 130 basis points, with positive operating leverage and favorable price/cost also helping offset higher overhead. A late-July tornado cut Welding revenue by an estimated $40 million, but insurance largely offset the associated operating-income loss; excluding the disruption, ITW estimated company organic growth would have been about 5%. Cash conversion was solid but below the prior-year quarter: free cash flow of $851 million equaled 100% of net income versus 110% a year earlier. ITW raised full-year EPS guidance by $0.05 at the midpoint to $11.45–$11.55 and raised total revenue growth guidance, while maintaining its organic growth outlook.
Organic growth mix
- Regional split: North American organic revenue grew 6.0%, while EMEA declined 0.4%; Asia Pacific increased 3.4%.
- Growth engines: Test & Measurement and Electronics organic revenue rose 15.8%, including 30.5% growth in electronics; Polymers & Fluids increased 8.2%.
- Other segments: Welding organic revenue grew 6.9% despite the tornado disruption. Food Equipment grew 0.5%, while Automotive OEM declined 2.1%, Specialty Products fell 1.2%, and Construction Products slipped 0.8%.
- Underlying demand: Management pointed to stronger capex-related demand in Welding and Test & Measurement and Electronics, alongside continued strength in Polymers & Fluids. Product-line simplification reduced company organic growth by 40 basis points.
Margin execution
Operating margin reached 27.8%, up 40 basis points year over year, with operating income rising to $1.177 billion. Enterprise initiatives added 130 basis points and positive operating leverage 80 basis points; favorable price/cost contributed 40 basis points as price actions more than offset rising raw-material costs. Higher overhead, including employee-related expenses, was a partial offset. The segment picture was uneven: Test & Measurement and Electronics margin expanded 330 basis points to 28.7%, and Welding expanded 370 basis points to 36.3%; Automotive OEM margin fell 170 basis points to 20.1%.
Welding tornado impact
- Revenue effect: A late-July tornado damaged two Welding facilities and reduced Q3 revenue by an estimated $40 million.
- Normalized growth: ITW estimated Welding organic growth would have been approximately 15% without the disruption, versus 6.9% reported, and company organic growth approximately 5%, versus 3.8%.
- Earnings and recovery: Business-interruption insurance largely offset the associated operating-income loss; the company expects the impact going forward to be immaterial.
2026 outlook
- EPS: Guidance rose by $0.05 at the midpoint to $11.45–$11.55, representing 10% year-over-year growth at the midpoint.
- Revenue: Full-year revenue growth guidance increased to 4.5%–5.5%; organic growth guidance was reaffirmed at 3%–4%.
- Margins and cash: ITW projects a 26.5%–27.5% operating margin, with enterprise initiatives contributing more than 100 basis points, and free cash flow of approximately 100% of net income.
- Repurchases: The company expects to repurchase approximately $1.5 billion of its shares in 2026.
Cash and capital returns
- Cash flow: Q3 operating cash flow was $953 million and free cash flow $851 million, compared with $1.021 billion and $904 million, respectively, a year earlier. Free-cash-flow conversion was 100% of net income versus 110%.
- Year to date: Free cash flow totaled $2.010 billion, up from $1.849 billion in the first nine months of 2025.
- Distributions: Q3 repurchases were $187 million. ITW raised its dividend 7%, to an annualized $6.88 per share, marking 63 consecutive years of increases.
IRS tax notice
The September IRS notice concerns the company’s 2018–2021 tax years and a 2021 capital loss from liquidation of a legal entity. It assesses $23 million of additional tax plus interest and penalties and disallows $47 million of refund claims; related additional taxes for years after 2021 total $148 million. ITW intends to petition the U.S. Tax Court and said it believes it will successfully defend its position.
