Illinois Tool Works navigated a mixed second quarter, with flat organic sales masking notable differences across its business segments. Management cited strong execution on pricing actions to offset tariffs and highlighted sequential improvement in both revenue and operating income compared to the prior quarter. CEO Chris O’Herlihy pointed to "meaningful strategic progress" and emphasized the company’s ability to control margin drivers, while CFO Michael Larsen acknowledged that some price increases were "modestly margin dilutive" in the quarter. Strength in Asia Pacific and key product lines was offset by ongoing weakness in consumer-oriented and construction markets.
Is now the time to buy ITW? Find out in our full research report (it’s free).
Illinois Tool Works (ITW) Q2 CY2025 Highlights:
- Revenue: $4.05 billion vs analyst estimates of $4.02 billion (flat year on year, 0.9% beat)
- EPS (GAAP): $2.58 vs analyst estimates of $2.56 (0.8% beat)
- Adjusted EBITDA: $1.16 billion vs analyst estimates of $1.15 billion (28.7% margin, 1.5% beat)
- EPS (GAAP) guidance for the full year is $10.45 at the midpoint, beating analyst estimates by 1.4%
- Operating Margin: 26.4%, in line with the same quarter last year
- Organic Revenue was flat year on year, in line with the same quarter last year
- Market Capitalization: $74.88 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Illinois Tool Works’s Q2 Earnings Call
- Tami Zakaria (JP Morgan) asked how price increases and volume trends factored into the reduced operating margin outlook. CFO Michael Larsen explained that pricing actions were EPS positive but slightly margin dilutive, with expectations for eventual margin recovery.
- Jamie Lyn Cook (Truist Securities) inquired about customer-backed innovation (CBI) traction outside of automotive. CEO Chris O’Herlihy highlighted new product launches in welding, food equipment, and automotive as key CBI contributors.
- Andy Kaplowitz (Citigroup) pressed for details on sequential growth and short-cycle business trends. Larsen pointed to encouraging momentum in semiconductors and capital equipment, while consumer markets remained challenged.
- Julian C.H. Mitchell (Barclays) questioned the muted impact of foreign exchange tailwinds on EPS guidance. Larsen explained the company’s conservative approach due to ongoing macro uncertainty, preferring to maintain cautious guidance.
- Stephen Edward Volkmann (Jefferies) asked about incremental margins and construction segment resilience. O’Herlihy and Larsen stressed that strong enterprise initiatives and portfolio quality are driving higher-than-historical incremental margins, even in difficult markets.
Catalysts in Upcoming Quarters
In the coming quarters, our analysts will closely monitor (1) whether positive momentum in the automotive and welding segments continues, especially in China and other Asia Pacific markets; (2) the impact of enterprise initiatives and pricing strategies on operating margin improvement across all business lines; and (3) any signs of stabilization or recovery in construction and consumer-facing segments. Progress on capital equipment orders and further evidence of innovation-driven market share gains will be key markers for Illinois Tool Works’ ability to execute its strategy.
Illinois Tool Works currently trades at $256.89, in line with $259.27 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free).
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