The Company in a Nutshell
- ITW continuously invests in new products and holds over 17,000 granted and pending patents. The company is a Dividend King with over 50 years of consecutive dividend increases. ITW focuses on an 80/20 management method, enabling it to scope out great business opportunities.
| Date Reviewed | 08/09/2025 |
| Company Name | Illinois Tool Works Inc |
| Symbol | ITW |
| Sector | Industrials |
| Industry | Specialty Industrial Machinery |
| Beta | 1.13 |
| PRO Rating | 4 |
| Dividend Safety | 4 |
Business Model
Illinois Tool Works Inc. is a global manufacturer of a diversified range of industrial products and equipment. The Company's segments include Automotive OEM; Food Equipment; Test & Measurement and Electronics; Welding; Polymers & Fluids; Construction Products, and Specialty Products. The Automotive OEM segment produces components and fasteners for automotive-related applications. The Food Equipment segment produces warewashing equipment, cooking equipment, refrigeration equipment, food processing equipment, ventilation and pollution control systems, and others. Its Welding segment produces arc welding equipment and metal arc welding consumables and related accessories. The Construction segment is a supplier of engineered fastening systems and solutions. The Specialty Products segment includes conveyor systems and line automation for the food and beverage industries; plastic consumables such as multipack cans and bottles and related equipment; components for medical devices, and others.
| Current price | 244.94 |
| ROE | 110.25 % |
| ROIC | 34.35 % |
| Shareholder Yield | 0.05 % |
| 5-Yr Total Return | 35.40 % |
| 1-Yr Total Return | -0.95 % |
| Next Earnings Date | 10-28-25 |
Latest Quarter Information
What the CEO said:
The ITW team outpaced underlying end market growth and delivered solid financial performance in the second quarter, achieving EPS of $2.58, operating income of $1.1 billion, and operating margin of 26.3 percent, all second-quarter records. Our results are a direct outcome of the strength of the ITW Business Model, the quality of our diversified and resilient portfolio, and the unwavering dedication of our global ITW colleagues to serving our customers and executing our strategy with excellence. I am very encouraged by the meaningful strategic progress we made in the first half of the year, diligently executing our Next Phase growth priorities.
2025-08-05, ITW reported good Q2 2025 results with modest top-line growth supported by a positive impact from foreign currency translation. The company continues to implement pricing actions to offset tariff costs. ITW achieved a GAAP DEPS of $2.58 and operating margin expanded by 10 bps to 26.3%, bolstered by enterprise initiatives. ITW generated an operating cash flow of $550M and FCF of $449M in Q2. It repurchased shares worth ~$375M in Q2. For the full year, ITW anticipates repurchasing ~$1.5B in shares. ITW has raised its FY25 GAAP EPS guidance by $0.10, narrowing the range to $10.35 to $10.55 per share. The company projects revenue growth of 1%-3%, and an OM of 26%-27%.
Investment Thesis
If an investor is looking for a stable and well-diversified industrial stock, ITW may be a great candidate. The company covers 7 different segments with similar sales volumes and margins. This means that no matter which sector is down, ITW will have growing sectors among its divisions. ITW has built a strong entrepreneurial culture within its business, where most divisions are encouraged to shoulder initiatives as long as they follow set protocols. ITW has been able to improve its margins over time by focusing on its most important customers and simplifying product lines; initiatives such as these will prove fruitful over time. We believe that ITW has some room to grow, as the automotive OEM segment should be supported by improvements in the semiconductor supply chain. ITW’s dividend triangle remains strong even if there is a slowdown due to the overall economic environment.
Dividend Triangle
| 5-Yr Rev. Growth | 4.65 % |
| 5-Yr EPS Growth | 11.55 % |
| 5-Yr Div Growth | 7.05 % |
Potential Risks
The market is concerned about the lack of revenue growth over the past 10 years. Although the situation has improved as of late, the company is not out of the woods yet. ITW failed to grow revenues in Q1 of 2025 and posted a 0.6% gain in Q2 of 2025. The company has had difficulty posting robust organic growth, with it being at only about 1-2% over the past decade, and it remains dependent on its acquisitions to generate further growth. As we move toward a potential recession, this problem may resurface this year. The stock price has been under pressure lately, mainly moving with the overall market; the good news is that it is close to our DDM. The biggest problem here is the lack of growth vectors. ITW is a resilient business, but sales will follow industrial cycles.
Dividend Growth Perspective
The company's payout has increased by 40% over the past 5 years and has over 50 years of dividend growth history, which is impressive, but an investor shouldn’t expect such growth rates going forward. Both payouts are under control, and management seems to be committed to sharing the wealth with shareholders. However, one can see ITW only increasing its payouts by a high single-digit rate for several years. In August of 2023, the company announced another generous increase of 6.9% (from $1.31/share to $1.40/share). This year, ITW offered another 7% increase and raised the dividend to $1.61/share.
| Dividend ($) | 6.44 |
| Dividend Yield Fwd | 2.60 % |
| Dividend Frequency | Quarterly |
| Average 5-Yr Yield | 2.20 % |
| Payout Ratio (%) | 49.25 |
| Cash Payout Ratio (%) | 63.80 |
| DGR 1-Yr | 7.20 |
| DGR 3-Yr | 7.15 |
| DGR 5-Yr | 7.05 |
| DGR Streak | 60 |
| Chowder Score | 9.60 |
| Next DVD PMT | 10-10-25 |
Valuation
| Recent Annual Dividend Payment | $ 6.44 |
| Expected Dividend Growth Rate Years 1-10 | 7.00% |
| Expected Terminal Dividend Growth Rate | 6.00% |
| Discount Rate | 9.00% |
| Discount Rate (Horizontal) | |||
| Margin of Safety | 8.00% | 9.00% | 10.00% |
| 20% Premium | $ 446.65 | $ 296.79 | $ 221.91 |
| 10% Premium | $ 409.43 | $ 272.06 | $ 203.41 |
| Intrinsic Value | $ 372.21 | $ 247.32 | $ 184.92 |
| 10% Discount | $ 334.99 | $ 222.59 | $ 166.43 |
| 20% Discount | $ 297.77 | $ 197.86 | $ 147.94 |
| Market Cap | 72 B |
| PE Ratio | 21.80 |
| Fwd PE | 22.45 |
| Price to Book Ratio | 22.55 |
| DDM Valuation | 247.32 |
| Average 5-Yr PE | 25.5 |
| Value Score | 37 |