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1. Company Snapshot

1.a. Company Description

Illinois Tool Works Inc.manufactures and sells industrial products and equipment worldwide.It operates through seven segments: Automotive OEM; Food Equipment; Test & Measurement and Electronics; Welding; Polymers & Fluids; Construction Products; and Specialty Products.


The Automotive OEM segment offers plastic and metal components, fasteners, and assemblies for automobiles, light trucks, and other industrial uses.The Food Equipment segment provides warewashing, refrigeration, cooking, and food processing equipment; kitchen exhaust, ventilation, and pollution control systems; and food equipment maintenance and repair services.The Test & Measurement and Electronics segment produces and sells equipment, consumables, and related software for testing and measuring of materials and structures, as well as equipment and consumables used in the production of electronic subassemblies and microelectronics.


The Welding segment produces arc welding equipment; and metal arc welding consumables and related accessories.The Polymers & Fluids segment produces adhesives, sealants, lubrication and cutting fluids, and fluids and polymers for auto aftermarket maintenance and appearance.The Construction Products segment offers engineered fastening systems and solutions for the residential construction, renovation/remodel, and commercial construction markets.


The Specialty Products segment offers beverage packaging equipment and consumables, product coding and marking equipment and consumables, and appliance components and fasteners.It serves the automotive OEM/tiers, commercial food equipment, construction, general industrial, and automotive aftermarket end markets.The company distributes its products directly to industrial manufacturers, as well as through independent distributors.


Illinois Tool Works Inc.was founded in 1912 and is based in Glenview, Illinois.

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1.b. Last Insights on ITW

Illinois Tool Works Inc.'s recent performance was driven by strong Q4 2025 earnings, with revenue growth of 4.1% and operating margin expansion to 26.5%. The company's Customer-Back Innovation initiatives contributed 2.4% to revenue growth. ITW's 2026 guidance includes revenue growth of 2-4% and operating margin expansion of approximately 100 bps. The company also announced a planned share buyback. Analysts view ITW as a buy due to its accelerating revenue growth, margin expansion, and discounted valuation. (Source: Bloomberg)

1.c. Company Highlights

2. 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.

Publication Date: Feb -04

📋 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.

3. NewsRoom

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Illinois Tool Works: The Market Has Better Opportunities Available

Feb -18

Source: seekingalpha.com

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3 Industrial Stocks Making New All-Time Highs

Feb -14

Source: marketbeat.com

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ITW Board of Directors Declares Quarterly Dividend

Feb -13

Source: globenewswire.com

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Illinois Tool Works: Cyclical Recovery And Structural Growth Improvements Should Drive Upside

Feb -13

Source: seekingalpha.com

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ProShare Advisors LLC Sells 35,233 Shares of Illinois Tool Works Inc. $ITW

Feb -09

Source: defenseworld.net

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Alps Advisors Inc. Trims Stock Position in Illinois Tool Works Inc. $ITW

Feb -09

Source: defenseworld.net

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Ernest Scott Santi Sells 167,345 Shares of Illinois Tool Works (NYSE:ITW) Stock

Feb -08

Source: defenseworld.net

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Market Today: Dow tops 50,000 as chip leaders rebound; Stellantis plunges

Feb -06

Source: gurufocus.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (3.30%)

6. Segments

Automotive OEM

Expected Growth: 3.0%

The automotive industry is experiencing a gradual shift towards electrification, which might slow down the growth. However, the increasing demand for lightweight and high-performance components could offset some of the decline, resulting in a slightly lower growth than the global average.

Test & Measurement and Electronics

Expected Growth: 4.0%

The segment benefits from the ongoing technological advancements and the increasing complexity of electronic devices, driving up the demand for sophisticated testing and measurement equipment, thus exceeding the global average growth.

Food Equipment

Expected Growth: 3.5%

The segment is expected to grow slightly above the global average due to the continuous need for efficient and safe food processing equipment, driven by consumer demand for processed and packaged foods.

Construction Products

Expected Growth: 3.2%

The growth in this segment is closely related to the global construction industry trends. While there might be fluctuations in different regions, the overall growth is expected to be slightly below the global average due to potential regional downturns.

Welding

Expected Growth: 3.1%

The segment's growth is influenced by the overall industrial production and infrastructure investments. The increasing demand for high-quality welding equipment and consumables supports a growth rate close to the global average.

Polymers & Fluids

Expected Growth: 3.4%

The segment benefits from the increasing demand for high-performance polymers and the ongoing advancements in polymer technology, supporting a growth rate slightly above the global average.

Specialty Products

Expected Growth: 3.6%

The diverse nature of this segment allows it to capitalize on growth opportunities across different markets, potentially leading to a growth rate above the global average.

Intersegment

Expected Growth: None%

None

7. Detailed Products

Welding

ITW's welding segment provides equipment, consumables, and accessories for various welding processes, including MIG, TIG, arc, and spot welding.

Food Equipment

ITW's food equipment segment offers commercial food equipment, including ovens, refrigerators, and dishwashers, for the foodservice and food retail industries.

Polymers & Fluids

ITW's polymers and fluids segment provides adhesives, sealants, lubricants, and other specialty chemicals for various industries, including automotive, aerospace, and construction.

Test & Measurement and Electronics

ITW's test and measurement and electronics segment offers equipment and consumables for testing, measurement, and inspection applications, as well as electronic components and assemblies.

Wuhan

ITW's Wuhan segment provides equipment and consumables for the Chinese welding market.

Automotive OEM

ITW's automotive OEM segment provides components and systems for automotive original equipment manufacturers, including fasteners, components, and assemblies.

Automotive Aftermarket

ITW's automotive aftermarket segment offers repair and maintenance products, including brake pads, friction materials, and vehicle accessories.

8. Illinois Tool Works Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Illinois Tool Works Inc. has a diversified product portfolio, which reduces the threat of substitutes. The company's products are highly specialized and customized, making it difficult for substitutes to enter the market.

Bargaining Power Of Customers

The bargaining power of customers is moderate due to the presence of large industrial customers. However, Illinois Tool Works Inc. has a strong brand reputation and a diversified customer base, which reduces the bargaining power of individual customers.

Bargaining Power Of Suppliers

The bargaining power of suppliers is low due to the company's large scale of operations and its ability to negotiate prices with suppliers. Illinois Tool Works Inc. also has a diversified supplier base, which reduces dependence on individual suppliers.

Threat Of New Entrants

The threat of new entrants is low due to the high barriers to entry in the industry. Illinois Tool Works Inc. has a strong brand reputation, a large customer base, and a significant investment in research and development, making it difficult for new entrants to compete.

Intensity Of Rivalry

The intensity of rivalry is high due to the presence of established competitors in the industry. Illinois Tool Works Inc. operates in a highly competitive market, and the company needs to continuously innovate and improve its products to maintain its market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 73.54%
Debt Cost 4.24%
Equity Weight 26.46%
Equity Cost 9.59%
WACC 5.65%
Leverage 277.89%

11. Quality Control: Illinois Tool Works Inc. passed 5 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Cummins

A-Score: 5.7/10

Value: 2.6

Growth: 5.6

Quality: 5.8

Yield: 4.0

Momentum: 8.5

Volatility: 8.0

1-Year Total Return ->

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Stock-Card
ITW

A-Score: 5.6/10

Value: 2.0

Growth: 5.1

Quality: 6.8

Yield: 5.0

Momentum: 4.5

Volatility: 10.0

1-Year Total Return ->

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Stock-Card
AMETEK

A-Score: 5.3/10

Value: 1.8

Growth: 5.8

Quality: 7.7

Yield: 1.0

Momentum: 6.0

Volatility: 9.3

1-Year Total Return ->

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Stock-Card
Emerson Electric

A-Score: 5.1/10

Value: 2.2

Growth: 4.1

Quality: 6.2

Yield: 4.0

Momentum: 6.0

Volatility: 8.3

1-Year Total Return ->

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Stock-Card
Otis

A-Score: 5.1/10

Value: 4.4

Growth: 4.4

Quality: 5.5

Yield: 3.0

Momentum: 4.0

Volatility: 9.0

1-Year Total Return ->

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Stock-Card
Ingersoll Rand

A-Score: 4.2/10

Value: 2.1

Growth: 7.4

Quality: 6.0

Yield: 0.0

Momentum: 2.5

Volatility: 7.3

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

294.98$

Current Price

294.98$

Potential

-0.00%

Expected Cash-Flows