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ITW: Illinois Tool Works Inc. Delivers Solid Finish to 2025 with Strong Guidance for 2026

Illinois Tool Works Inc. reported a robust fourth quarter in 2025, with revenue growth of 4% and a 7% increase in GAAP EPS to $2.72, surpassing analyst estimates of $2.69. The company's organic growth stood at 1.3%, and operating income reached $1.1 billion, a 5% increase. Segment margins were 27.7%, with a significant 140 basis point contribution from enterprise initiatives.

ITW

USD 298.07

1.3%

A-Score: 5.6/10

Publication date: February 3, 2026

Full Report

Author: Analystock.ai

📋 Highlights
  • Strong Q4 Revenue and EPS Growth 4% revenue growth, 7% EPS increase to $2.72.
  • Operating Income and Margin Expansion $1.1 billion operating income (+5%), 27.7% segment margins.
  • Customer-Backed Innovation Progress 2.4% CBI revenue growth (9% patent filing rise in 2025).
  • 2026 Guidance and Buyback Plan $11–$11.20 EPS (7% growth), $1.5 billion share buybacks (2% EPS uplift).
  • Free Cash Flow and Margin Improvements >100% net income conversion, 100 bps margin expansion via enterprise initiatives.
  • Strong Q4 Revenue and EPS Growth 4% revenue growth, 7% EPS increase to $2.72.
  • Operating Income and Margin Expansion $1.1B operating income (+5%), 27.7% segment margins (140 bps from initiatives).
  • Customer-Backed Innovation Momentum 2.4% CBI revenue growth, patent filings up 9% in 2025 (18% in 2024).
  • 2026 Guidance and Buyback Plan $11–$11.20 EPS (7% growth), $1.5B share buybacks (2% EPS uplift).
  • Margin Improvements and Free Cash Flow 100 bps margin expansion via initiatives, >100% free cash flow conversion to net income.

Financial Performance Highlights

The company's financial performance in 2025 was marked by a 2.4% customer-backed innovation (CBI)-fueled revenue growth, a 40 basis point improvement from the previous year. Patent filings, a key leading indicator of CBI contribution, increased by 9% in 2025, following an 18% rise in 2024. This momentum is expected to continue into 2026, with the company on track to reach its 2030 goal of 3% plus CBI contribution.

Guidance for 2026

For 2026, Illinois Tool Works Inc. provided guidance that includes an organic growth projection of 1% to 3%, an EPS range of $11 to $11.20, representing 7% growth, and operating margin expansion of about 100 basis points. The company expects free cash flow conversion to net income of greater than 100% and plans to buy back approximately $1.5 billion of its shares in 2026. Analysts estimate revenue growth at 3.5% for the next year.

Valuation Metrics

With a P/E Ratio of 26.8 and an EV/EBITDA of 19.39, the market appears to have priced in a certain level of growth for Illinois Tool Works Inc. The company's ROE stands at 93.28%, and ROIC is 24.18%, indicating strong profitability. The Dividend Yield is 2.23%, providing a relatively stable return for investors.

Segment Performance and Outlook

The polymers and fluids segment had a strong quarter, driven by growth in the automotive aftermarket and biopharma businesses. The company is guiding for 1-3% growth in this segment in 2026. The test and measurement segment is also expected to see improvement, driven by a pickup in orders and revenue in the semi business.

Management Confidence and Initiatives

Management is confident in its guidance and is well-positioned to deliver solid results in 2026. The company is focused on differentiation and innovation, with a strong emphasis on CBI. The CBI metric has been added to the incentive plans, aligning with the overall strategic importance of this initiative.

ITW's A-Score