Illinois Tool Works Inc. (NYSE:ITW) announced its fourth-quarter and fiscal year 2025 financial outcomes on Tuesday, with the stock responding positively to the news. The company’s full-year revenue edged up to $16 billion, representing a modest 0.9% increase from the previous year. Earnings per share on a GAAP basis reached $10.49, slightly surpassing the prior midpoint guidance of $10.45.
For the fourth quarter, ITW reported operating revenue of $4.093 billion, marking a 4.1% rise compared to the same period in the prior year. Organic revenue contributed a 1.3% growth, supplemented by foreign currency translation effects adding 2.5%, and acquisitions accounting for an additional 0.3%. The company posted GAAP earnings per share of $2.72, a 7% improvement year-over-year that exceeded analyst expectations, which anticipated $2.69 EPS and $4.068 billion in revenue.
Christopher O’Herlihy, President and CEO of Illinois Tool Works, remarked on the results, saying, "ITW delivered a solid finish to the year, marked by more than four percent revenue growth and a seven percent increase in GAAP earnings per share. As a result of our disciplined execution across all seven segments, we expanded both operating margin and income to record levels in the quarter."
Operating margin reached 26.5%, up by 30 basis points, bolstered notably by enterprise initiatives contributing 140 basis points. Segment operating margin climbed to 27.7%. The company generated $1.0 billion in operating cash flow and $900 million in free cash flow, translating to a 109% free cash flow conversion relative to net income. During the quarter, ITW repurchased $375 million worth of shares. The effective tax rate stood at 22.8%, while acquisition-related intangible asset amortization had an unfavorable impact of $0.05 on the quarter's GAAP EPS.
Segment Results
Operational performance varied across ITW's seven business segments, each contributing to the overall solid financial picture in the quarter.
- Automotive OEM: Delivered $827 million in revenue, reflecting a 5.5% increase year-over-year, alongside an operating margin of 21.8%.
- Food Equipment: Recorded $698 million in sales, up 3.8%, with a 28.0% operating margin.
- Test & Measurement and Electronics: Generated $789 million in revenue, an increase of 5.5%, maintaining a strong 28.1% margin.
- Welding: Brought in $462 million, a 3.3% growth, coupled with a robust 33.3% margin.
- Polymers & Fluids: Achieved $457 million in revenue, up 6.5%, alongside a 29.0% margin.
- Construction Products: Revenue slightly decreased by 1.5% to $431 million, with an operating margin of 29.0%.
- Specialty Products: Posted $433 million in revenue, a 4.0% increase, sustaining a 28.7% margin.
The comprehensive segment operating margin rose by 120 basis points to 27.7%, attributed to robust performance in most sectors.
2026 Outlook
Looking ahead, Illinois Tool Works issued guidance for fiscal year 2026 that anticipates revenue growth between 2% and 4%, with organic growth estimated at 1% to 3%. GAAP earnings per share are projected in the range of $11.00 to $11.40, which represents approximately a 7% increase at the midpoint compared to the current analyst consensus of $11.29.
The company's sales forecast targets a range between $16.378 billion and $16.699 billion, near the analyst estimate of $16.555 billion. Additionally, ITW expects an expansion of the operating margin by roughly 100 basis points, largely driven by enterprise initiative contributions estimated at 100 basis points.
Capital allocation plans include $1.5 billion earmarked for share repurchases, illustrating ongoing shareholder return strategies. Free cash flow is expected to exceed net income by over 100%, indicating sustained cash generation strength. Furthermore, all seven business segments are forecasted to deliver positive organic growth and expand their operating margins in the upcoming year.
Stock Market Response
Following the earnings announcement on Tuesday, ITW shares rose sharply by 5.44% to $278.58 at the time of publication, reaching a new 52-week high as recorded by market data services.