Illinois Tool Works’ third quarter results drew a negative market reaction, as organic revenue growth lagged Wall Street expectations and overall sales growth remained modest. Management attributed these outcomes to ongoing demand softness across several end markets, particularly in North America and Europe, while highlighting standout growth in Asia and the automotive original equipment manufacturer (OEM) segment. CEO Christopher O’Herlihy pointed to effective cost control, continued operational execution, and the company’s ability to “outpace underlying end market demand” as partial offsets to a mixed revenue environment.
Is now the time to buy ITW? Find out in our full research report (it’s free for active Edge members).
Illinois Tool Works (ITW) Q3 CY2025 Highlights:
- Revenue: $4.06 billion vs analyst estimates of $4.09 billion (2.3% year-on-year growth, 0.8% miss)
- EPS (GAAP): $2.81 vs analyst estimates of $2.70 (4.1% beat)
- Adjusted EBITDA: $1.21 billion vs analyst estimates of $1.20 billion (29.8% margin, 0.6% beat)
- EPS (GAAP) guidance for the full year is $10.45 at the midpoint, roughly in line with what analysts were expecting
- Operating Margin: 27.4%, in line with the same quarter last year
- Organic Revenue was flat year on year vs analyst estimates of 1.7% growth (95.1 basis point miss)
- Market Capitalization: $70.9 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Illinois Tool Works’s Q3 Earnings Call
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Jeffrey Sprague (Vertical Partners) asked how Illinois Tool Works sustained margin improvement in construction despite 11 consecutive quarters of organic revenue declines; CEO Christopher O’Herlihy credited portfolio focus and execution in attractive market segments.
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Andrew Kaplowitz (Citi) inquired about the feasibility of achieving full-year organic growth guidance given Q3 trends; CFO Michael Larsen explained that typical Q4 seasonality and improvement in Test & Measurement should support the outlook, while cautioning on demand volatility.
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Jamie Cook (Truist Securities) pressed on why guidance was not raised further despite currency and tax rate tailwinds; Larsen responded that a “measured, cautious approach” to guidance was warranted due to a choppy demand environment.
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Tami Zakaria (JPMorgan) questioned the ongoing impact of product line simplification (PLS); O’Herlihy clarified that PLS is a bottom-up, ongoing process to strengthen margins and focus resources, but could vary in magnitude year-to-year.
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Nigel Coe (Wolfe Research) queried about the unusual sales cadence during the quarter and the benefit from restructuring; Larsen described the quarter as “choppy,” with strong starts in June and July, followed by slower August, and noted that restructuring benefits are tied to ongoing 80/20 initiatives.
Catalysts in Upcoming Quarters
In upcoming quarters, the StockStory team will closely monitor (1) sustained momentum in the automotive OEM business, especially in China and EV content growth, (2) realization of margin gains from enterprise initiatives and product line simplification efforts, and (3) signs of stabilization or recovery in end markets like construction and electronics. Additionally, the impact of future tariff changes and the pace of customer-backed innovation adoption will be critical markers of Illinois Tool Works’ execution.
Illinois Tool Works currently trades at $240.64, down from $257.41 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free for active Edge members).
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