Illinois Tool Works raises 2026 EPS guidance as third-quarter earnings per share grow 7%

Illinois Tool Works Inc. (ITW) said Tuesday that third-quarter revenue rose 4% to $4.24 billion and that it is raising its full-year 2026 earnings guidance, according to a press release furnished with a regulatory filing.

GAAP earnings per share grew 7% to $3.00 for the quarter, and operating income reached a quarterly record of $1.18 billion.

Here's how the company did:

• Revenue: $4.24 billion vs. $4.06 billion a year earlier

• Diluted earnings per share: $3.00 vs. $2.81 a year earlier

• Operating income: $1.18 billion vs. $1.11 billion a year earlier

• Free cash flow: $851 million vs. $904 million a year earlier

Free cash flow, which the company defines as operating cash flow less additions to plant and equipment, equaled 100% of net income in the quarter.

Operating margin expanded 40 basis points to 27.8%. The company said enterprise initiatives contributed 130 basis points.

Price increases and other actions more than offset rising raw material costs, the company said, resulting in a favorable impact on both operating income and margin.

Organic revenue growth was 3.8%, led by 6.0% growth in North America. Foreign currency translation added 0.3% to revenue, and an acquisition added 0.3%.

“The ITW team delivered strong operational execution and financial performance in the third quarter,” said President and Chief Executive Officer Christopher A. O’Herlihy.

“We entered the fourth quarter with strong operational momentum and are raising our EPS guidance for the year,” O’Herlihy said.

Tornado damage to two Welding facilities in late July reduced third-quarter revenue by an estimated $40 million. Excluding that impact, the company estimates Welding organic growth would have been about 15%, and the associated loss of operating income was largely offset by business interruption insurance.

The company said the impact going forward is expected to be immaterial.

Test & Measurement and Electronics posted organic growth of 15.8% on revenue of $819 million, with a 28.7% operating margin.

Polymers & Fluids revenue was $477 million, up 8.2% organically. Automotive OEM revenue was $814 million, with organic revenue down 2.1% and an operating margin of 20.1%.

Food Equipment revenue was $698 million, up 0.5% organically. Construction Products revenue was $472 million, with organic revenue down 0.8%, and Specialty Products revenue was $447 million, down 1.2% organically.

The effective tax rate for the quarter was 24.4%. Amortization expense from acquisition-related intangible assets reduced GAAP earnings per share by $0.04 in the quarter.

For the first nine months, revenue was $12.55 billion, up from $11.95 billion a year earlier, and diluted earnings per share were $8.49, against $7.77.

The results included a $34 million discrete tax benefit recorded in the first quarter, which the filing says primarily related to the resolution of a U.S. tax audit.

During the quarter, the company repurchased $187 million of its own shares and raised its dividend 7%. The increase marks the 63rd consecutive year of dividend increases and brings the annualized payout to $6.88 per share.

ITW is raising its full-year 2026 GAAP EPS guidance by $0.05 at the midpoint to a range of $11.45 to $11.55 per share, which the company said represents 10% growth at the midpoint.

The company raised its revenue growth guidance to 4.5% to 5.5% and reaffirmed its organic growth guidance of 3% to 4%, based on current demand levels and prevailing foreign exchange rates.

Operating margin is projected at 26.5% to 27.5%, with enterprise initiatives contributing more than 100 basis points. Free cash flow is projected at about 100% of net income, and the company expects to repurchase about $1.5 billion of its own shares.

The projected effective tax rate is 23% to 24%. The company did not provide a reconciliation of its free cash flow conversion guidance to a GAAP measure, saying the effort would be unreasonable.

The company also reported after-tax return on average invested capital of 30.3% for the quarter, compared with 29.8% a year earlier.