ITW Construction Products in Crawley, England, in January 2017. Photo: David Howard / Geograph via Wikimedia Commons, CC BY-SA 2.0. Resized.
Illinois Tool Works raised its full-year earnings forecast Tuesday after stronger industrial demand and pricing helped lift quarterly profit, even as tornado damage at two welding facilities cost the manufacturer an estimated $40 million in sales.
The company reported third-quarter revenue of $4.24 billion, up 4.4% from a year earlier. Net income rose to $855 million from $821 million, while diluted earnings increased to $3 a share from $2.81, according to its earnings announcement.
ITW supplies equipment and products across industrial markets. Its results offer a view of business spending beyond the largest technology companies: management said demand was accelerating in welding and in test, measurement and electronics, areas linked to customers’ investment in equipment.
Sales growth excluding acquisitions and currency effects was 3.8%, led by 6% growth in North America. ITW also reported continued strength in its polymers and fluids business and a larger contribution from new products developed around customer needs.
Price increases outpace higher material costs
Operating income reached a company record of $1.18 billion, up 5.9%. The operating profit margin rose to 27.8% from 27.4%, meaning ITW kept about 28 cents in operating profit for each dollar of revenue, before interest and taxes.
The company said price increases and other actions more than offset rising raw-material costs. That helped earnings, but it also shows that higher input costs have not disappeared from manufacturers’ calculations. ITW did not provide a measure of how those increases affected the prices ultimately paid by consumers.
The quarter also carried a weather-related setback. A late-July tornado damaged two facilities in ITW’s welding business. Without the disruption, the company estimated that welding’s underlying sales growth would have been about 15%, lifting companywide underlying growth to roughly 5%.
Business-interruption insurance largely offset the lost operating profit, ITW said. It expects the continuing effect of the damage to be immaterial.
A narrower, higher earnings forecast
ITW now expects 2026 earnings of $11.45 to $11.55 a share, raising the midpoint of its forecast by 5 cents. It also raised its expected revenue growth to 4.5% to 5.5%, while keeping its underlying sales-growth forecast at 3% to 4%.
Those projections depend on current demand and exchange rates. They are company forecasts, not results already achieved.
For shareholders, ITW reported $187 million of stock repurchases during the quarter and said it expects to buy back about $1.5 billion for the full year. The company also raised its dividend by 7%, taking the annualized payout to $6.88 a share and extending its record of consecutive annual dividend increases to 63 years.
Operating cash flow was $953 million. Free cash flow, the cash left after capital spending, was $851 million, nearly equal to quarterly net income.
JBizNews Desk | New York
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