Illinois Tool Works (NYSE:ITW) reported third-quarter results marked by accelerating demand in several capital-expenditure-related businesses, higher operating margins and increased full-year earnings guidance, despite a tornado that disrupted two Welding facilities.
Chief Executive Officer Chris O’Herlihy said organic revenue grew 4% in the quarter, or 5% excluding the impact of the tornado event. The company said the damage to its Welding locations reduced third-quarter revenue by about $40 million, or approximately 1 percentage point. O’Herlihy said employees were safe and operations were restored quickly.
“With Welding order growth running well ahead of revenue, we expect Welding to return to strong growth again in the fourth quarter and carry good momentum into next year,” O’Herlihy said.
Revenue, Profit and Cash Flow
Total revenue increased 4.4%, including 3.8% organic growth, a 0.3% contribution from foreign-currency translation and 0.3% from an acquisition, Chief Financial Officer Michael Larsen said. Excluding the tornado disruption, organic growth would have been about 4.8%.
Operating margin expanded 40 basis points from a year earlier to 27.8%, while operating income rose 6% to a quarterly record, according to O’Herlihy. Enterprise initiatives contributed 130 basis points to operating margin during the quarter.
GAAP earnings per share increased 7% to $3.00. Larsen said results absorbed an approximately $0.10 per-share headwind from a higher effective tax rate, which rose to 24.4% from 21.8% in the prior-year period.
Free cash flow totaled $851 million, equal to 100% of net income. For the first nine months of the year, free cash flow rose 9% to more than $2 billion, or 82% of net income.
The company also raised its dividend by 7%, its 63rd consecutive annual dividend increase. ITW returned $2.7 billion to shareholders through dividends and repurchases over the first three quarters, including planned full-year share repurchases of about $1.5 billion.
Growth Led by Test, Electronics, Welding and Polymers
Demand was strongest in ITW’s Test & Measurement and Electronics, Welding, and Polymers & Fluids segments.
- Test & Measurement and Electronics: Organic revenue rose 16%, including a 31% increase in electronics and 8% growth in test and measurement. The electronics business serves the printed circuit board industry, while semiconductor-related businesses serve chip manufacturing customers. Segment operating margin increased 330 basis points to 28.7%.
- Welding: Organic growth was 7%, or 15% excluding the tornado impact. Equipment revenue increased 5%, while consumables revenue grew at a double-digit rate. North American revenue, representing 85% of the segment, rose 8%, supported by infrastructure, energy, aerospace, defense and semiconductor demand. Business interruption insurance offset the operating-income loss associated with the storm, Larsen said.
- Polymers & Fluids: Organic growth reached 8%, including 6% in automotive aftermarket, 12% in polymers and 9% in fluids. The segment benefited from market-share gains, new products and demand in general industrial and biopharma markets. Operating margin rose 280 basis points to 31.3%.
O’Herlihy said Customer-Back Innovation, or CBI, contributed more than 3% to revenue growth year to date, compared with 2.4% in 2025. ITW raised its full-year CBI outlook to more than 3% and said it expects the contribution to improve further over time as the company continues to add projects to its innovation pipeline.
“The most actionable and sustainable way that we drive organic growth over the long term is CBI,” O’Herlihy said during the question-and-answer session.
Mixed Results in Consumer- and Rate-Sensitive Businesses
Automotive OEM organic revenue declined 2% against a 5% growth comparison a year earlier. Revenue declined 1% in North America, 7% in Europe and 1% in China. Larsen said the company outperformed vehicle build rates in North America and China, while Europe was affected by customer mix and product-line simplification.
Automotive OEM operating margin declined 170 basis points, largely because of resin inflation and a lag between cost increases and pricing actions. O’Herlihy said ITW is recovering pricing in both Automotive OEM and Construction Products, while enterprise initiatives and higher-margin innovation remain the primary drivers of longer-term margin improvement.
Food Equipment organic revenue rose 1%, as 5% service growth offset a 2% decline in equipment revenue. International revenue increased 5%, while North American revenue declined 3%, reflecting soft institutional demand that was partially offset by growth in retail-related markets. Operating margin improved 60 basis points to 29.8%.
Construction Products organic revenue declined 1%, though the company estimated its end markets fell by the mid-single digits. Commercial construction revenue in North America rose 19%, driven in part by data-center construction, while North American residential renovation declined 2%. Segment operating margin fell 170 basis points to 29.9%, primarily due to near-term price-cost pressure.
Specialty Products organic revenue declined 1%, including a 130-basis-point impact from product-line simplification, mainly in appliance components. Operating margin declined 90 basis points to 31.4%.
Outlook Raised Again
ITW maintained its full-year organic growth forecast of 3% to 4%, despite the Welding disruption. The outlook implies organic growth of more than 5% in the fourth quarter, with revenue expected to increase 1% to 2% sequentially despite two fewer shipping days.
The company raised its total revenue growth outlook by 50 basis points to 4.5% to 5.5%, reflecting current foreign exchange rates. It maintained full-year operating-margin guidance of 26.5% to 27.5% and expects fourth-quarter margins in the mid- to high-27% range.
ITW raised GAAP earnings-per-share guidance by $0.05 to a range of $11.45 to $11.55, with a midpoint of $11.50 representing 10% year-over-year growth. The increase marked the company’s third guidance raise of the year.
Looking toward 2027, management cited elevated order activity and modestly higher backlog in Welding, Test & Measurement and Electronics, though Larsen emphasized that ITW remains a short-cycle business and described the additional backlog in terms of months rather than years. The company reiterated its long-term framework of at least 4% organic growth and a 30% operating margin by 2030.
About Illinois Tool Works (NYSE:ITW)
Illinois Tool Works Inc (NYSE: ITW) is a diversified industrial manufacturer that develops and produces specialized equipment, components, consumables and systems for customers in a range of industries. Founded in 1912 and headquartered in Glenview, Illinois, the company serves markets worldwide through a portfolio of highly engineered businesses.
ITW’s operations include food equipment, automotive components, welding products, test and measurement equipment, electronics materials, polymers and fluids, construction products, and specialty products.
