Revenue of $4.0 billion, a decrease of 1% with flat organic growth
Operating income of $1.05 billion, an increase of 4.5%
Operating margin of 26.2%, an increase of 140 bps as enterprise initiatives contributed 140 bps
GAAP EPS of $2.54, an increase of 2%; Excl. a one-time 2023 tax item, EPS increased 5%
Narrowing full year GAAP EPS guidance to a range of $10.30 to $10.40 per share
GLENVIEW, Ill., July 30, 2024 (GLOBE NEWSWIRE) — Illinois Tool Works Inc. (NYSE:ITW) today reported its second quarter 2024 results and updated guidance for full-year 2024.
“While the demand environment continued to moderate across our portfolio, we delivered a solid quarter with strong operational execution and profitability,” said Christopher A. O’Herlihy, President and Chief Executive Officer. “Our ability to overcome near-term macro challenges and expand our margin and profitability to record levels as evidenced by margin improvement of 140 basis points to 26.2 percent and EPS growth of more than five percent, is a direct result of the focused execution by our team of dedicated ITW professionals around the world.”
“Looking ahead, we are lowering the top-end of our full year GAAP EPS guidance to reflect current levels of demand partially offset by better margin performance. We remain focused on managing and investing for the long-term as we build above-market organic growth, fueled by customer-back innovation, into a core ITW strength,” O’Herlihy concluded.
Second Quarter 2024 Results
Second quarter revenue of $4.0 billion declined by 1.2 percent as organic growth declined 0.1 percent. Foreign currency translation impact reduced revenue by 1.2 percent and acquisitions added 0.1 percent.
GAAP EPS increased 2.4 percent to $2.54 and excluding a one-time tax item in 2023, EPS increased 5.4 percent. Operating income increased 4.5 percent to $1.05 billion, a second quarter record. Operating margin improved 140 basis points to 26.2 percent, a second quarter record, as enterprise initiatives contributed 140 basis points. Operating cash flow was $687 million, and free cash flow was $571 million with a conversion of 75 percent to net income. During the quarter, the company repurchased $375 million of its own shares and the effective tax rate was 24.4 percent.
2024 Guidance
ITW is lowering the top-end of its full year GAAP EPS guidance range of $10.30 to $10.70 per share to a narrower range of $10.30 to $10.40 per share, an increase of six percent compared to the prior year at the midpoint. Based on current levels of demand and foreign currency exchange rates exiting the second quarter, the company is projecting revenue growth and organic growth to be approximately flat for 2024. ITW is raising its operating margin guidance from 26 to 27 percent to a narrower range of 26.5 to 27 percent, an increase of 165 bps at the midpoint with enterprise initiatives projected to contribute more than 100 basis points. Free cash flow is expected to exceed 100 percent of net income and the company plans to repurchase approximately $1.5 billion of its own shares. The projected effective tax rate remains unchanged in the range of 24 to 24.5 percent.
Non-GAAP Measures
This earnings release contains certain non-GAAP financial measures. A reconciliation of these measures to the most directly comparable GAAP measures is included in the attached supplemental reconciliation schedule. The estimated guidance of free cash flow to net income conversion rate is based on assumptions that are difficult to predict, and estimated guidance for the most directly comparable GAAP measure and a reconciliation of this forward-looking estimate to its most directly comparable GAAP estimate have been omitted due to the unreasonable efforts required in connection with such a reconciliation and the lack of reliable forward-looking cash flow information. For the same reasons, the company is unable to address the potential significance of the unavailable information, which could be material to future results.
Forward-looking Statements
This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements may include, without limitation, statements regarding global supply chain challenges, expected impact of inflation including raw material inflation and rising interest rates, the impact of enterprise initiatives, future financial and operating performance, free cash flow and free cash flow to net income conversion rate, organic and total revenue, operating and incremental margin, price/cost impact, statements regarding diluted income per share, expected dividend payments, after-tax return on invested capital, effective tax rates, exchange rates, expected timing and amount of share repurchases, end market economic and regulatory conditions, the impact of recent or potential acquisitions and/or divestitures, and the Company’s 2024 guidance. These statements are subject to certain risks, uncertainties, assumptions, and other factors, which could cause actual results to differ materially from those anticipated. Important risks that could cause actual results to differ materially from the Company’s expectations include those that are detailed in ITW’s Form 10-K for 2023 and subsequent reports filed with the SEC.
About Illinois Tool Works
ITW (NYSE:ITW) is a Fortune 300 global multi-industrial manufacturing leader with revenue of $16.1 billion in 2023. The company’s seven industry-leading segments leverage the unique ITW Business Model to drive solid growth with best-in-class margins and returns in markets where highly innovative, customer-focused solutions are required. ITW’s approximately 45,000 dedicated colleagues around the world thrive in the company’s decentralized and entrepreneurial culture. www.itw.com
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
STATEMENT OF INCOME (UNAUDITED)
Three Months Ended
Six Months Ended
June 30,
June 30,
In millions except per share amounts
2024
2023
2024
2023
Operating Revenue
$
4,027
$
4,074
$
8,000
$
8,093
Cost of revenue
2,262
2,344
4,407
4,685
Selling, administrative, and research and development expenses
686
690
1,362
1,365
Amortization and impairment of intangible assets
25
30
50
61
Operating Income
1,054
1,010
2,181
1,982
Interest expense
(75
)
(69
)
(146
)
(129
)
Other income (expense)
26
20
42
30
Income Before Taxes
1,005
961
2,077
1,883
Income Taxes
246
207
499
415
Net Income
$
759
$
754
$
1,578
$
1,468
Net Income Per Share:
Basic
$
2.55
$
2.49
$
5.29
$
4.83
Diluted
$
2.54
$
2.48
$
5.27
$
4.81
Cash Dividends Per Share:
Paid
$
1.40
$
1.31
$
2.80
$
2.62
Declared
$
1.40
$
1.31
$
2.80
$
2.62
Shares of Common Stock Outstanding During the Period:
Average
297.6
303.3
298.3
304.1
Average assuming dilution
298.5
304.2
299.3
305.2
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
STATEMENT OF FINANCIAL POSITION (UNAUDITED)
In millions
June 30, 2024
December 31, 2023
Assets
Current Assets:
Cash and equivalents
$
862
$
1,065
Trade receivables
3,250
3,123
Inventories
1,819
1,707
Prepaid expenses and other current assets
325
340
Total current assets
6,256
6,235
Net plant and equipment
2,011
1,976
Goodwill
4,910
4,909
Intangible assets
641
657
Deferred income taxes
448
479
Other assets
1,311
1,262
$
15,577
$
15,518
Liabilities and Stockholders’ Equity
Current Liabilities:
Short-term debt
$
2,044
$
1,825
Accounts payable
576
581
Accrued expenses
1,615
1,663
Cash dividends payable
416
419
Income taxes payable
153
187
Total current liabilities
4,804
4,675
Noncurrent Liabilities:
Long-term debt
6,429
6,339
Deferred income taxes
381
326
Noncurrent income taxes payable
—
151
Other liabilities
1,001
1,014
Total noncurrent liabilities
7,811
7,830
Stockholders’ Equity:
Common stock
6
6
Additional paid-in-capital
1,636
1,588
Retained earnings
27,866
27,122
Common stock held in treasury
(24,622
)