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Illinois Tool Works Inc. reported its fourth quarter and full year 2025 results.
“ITW delivered a solid finish to the year, marked by more than four percent revenue growth and a seven percent increase in GAAP earnings per share. As a result of our disciplined execution across all seven segments, we expanded both operating margin and income to record levels in the quarter,” said Christopher O’Herlihy, President and Chief Executive Officer.
“Our results over the past year demonstrate that ITW is well-positioned to deliver solid financial performance in any environment as we consistently exceeded market growth while improving profitability and margins. Notably, our Customer-Back Innovation initiatives were a primary catalyst, contributing 2.4 percent to revenue growth in 2025. Building on this momentum, we expect to continue outperforming our end markets in 2026 as we leverage ITW’s unique business model to drive consistent, above-market organic growth with best-in-class margins and returns. I extend my sincere gratitude to our global colleagues for their unwavering dedication to serving our customers and executing our strategy with excellence,” O’Herlihy concluded.
Fourth Quarter 2025 Results
Fourth quarter revenue of $4.1 billion increased by 4.1 percent and organic revenue growth was 1.3 percent. Foreign currency translation increased revenue by 2.5 percent and acquisitions added 0.3 percent.
GAAP EPS of $2.72 increased seven percent. Operating margin of 26.5 percent increased 30 basis points as enterprise initiatives contributed 140 basis points. Segment operating margin increased 120 basis points to 27.7 percent. Operating cash flow was $1 billion, and free cash flow was $0.9 billion with a conversion of 109 percent to net income. During the quarter, the company repurchased $375 million of its own shares and the effective tax rate was 22.8 percent.
Full Year 2025 Results
Full year revenue of $16 billion increased 0.9 percent as organic revenue was flat. Foreign currency translation increased revenue by 0.8 percent and acquisitions contributed 0.1 percent to revenues.
GAAP EPS of $10.49 exceeded the prior guidance mid-point of $10.45. Operating income was $4.2 billion and operating margin was 26.3 percent with enterprise initiatives contributing 130 basis points. Segment operating margin of 27.2 percent increased 70 basis points. Pricing and supply chain actions successfully offset the tariff impact for the year. Six of seven segments expanded operating margins with three segments achieving operating margins above 30 percent.
Operating cash flow was $3.1 billion and free cash flow was $2.7 billion, with a conversion of 88 percent to net income. The company invested approximately $0.8 billion to support the long-term growth of its highly profitable businesses and returned $3.3 billion to shareholders through dividends and share repurchases. The effective tax rate was 22.7 percent.
2026 Guidance
ITW is initiating 2026 guidance including GAAP EPS in the range of $11.00 to $11.40 per share, which represents seven percent earnings growth at the mid-point. The company projects revenue growth of two to four percent and organic growth of one to three percent based on current levels of demand and present foreign exchange rates.
Operating margin is projected to be in the range of 26.5 to 27.5 percent, an improvement of approximately 100 basis points with enterprise initiatives contributing 100 basis points.
All seven segments are expected to deliver positive organic growth and operating margin expansion in 2026.
Free cash flow is projected to be greater than 100 percent of net income, and the company plans to repurchase approximately $1.5 billion of its own shares. The projected effective tax rate is 23.5 to 24.5 percent.
