ITW Reports Third Quarter 2024 Results
Revenue of $4.0 billion, a decrease of 2% as organic growth declined 1%
Operating margin of 26.5% as enterprise initiatives contributed 130 basis points
GAAP EPS of $3.91 included a divestiture gain of $1.26; ex-gain EPS of $2.65, an increase of 4%
Raising full year GAAP EPS guidance by $1.33 to a range of $11.63 to $11.73 per share
GLENVIEW, Ill., Oct. 30, 2024 (GLOBE NEWSWIRE) -- Illinois Tool Works Inc. (NYSE:ITW) today reported its third quarter 2024 results.
"ITW delivered solid third quarter results, as our worldwide team continued to successfully navigate and overcome market challenges with strong operational execution as evidenced by operating margin of 26.5 percent, including 130 basis points contribution from enterprise initiatives, and EPS growth to $2.65 per share excluding a divesture gain," said Christopher A. O'Herlihy, President and Chief Executive Officer. "All year, our focused execution and operational excellence have enabled the Company to effectively counter persistent market headwinds and achieve solid growth in margin and profitability while we continued to manage and invest in ITW to maximize growth and performance over the long term."
"As we look ahead to the balance of the year and beyond, ITW remains well-positioned to continue to execute at a high level through these near-term end market macro challenges while we remain focused on driving continued progress on our long-term strategy to build above-market organic growth, fueled by customer-back innovation, into a core ITW strength," O'Herlihy concluded.
Third Quarter 2024 ResultsThird quarter revenue of $4.0 billion declined by 1.6 percent as organic growth declined by 1.4 percent. Foreign currency translation impact reduced revenue by 0.4 percent and acquisitions increased revenue by 0.2 percent.
GAAP EPS increased 53 percent to $3.91 per share and included a divestiture gain of $1.26 from the previously announced sale of the Company's equity interest in Wilsonart International Holdings LLC ("Wilsonart"). Excluding this gain, EPS of $2.65 increased four percent.
Operating income was $1.05 billion and operating margin of 26.5 percent was flat with prior year. Enterprise initiatives contributed 130 basis points and six of seven segments expanded operating margin. Sequentially, operating margin improved 30 basis points from the second quarter of 2024.
Operating cash flow was $891 million, and free cash flow was $783 million, with a conversion rate to adjusted net income of 102 percent. During the quarter, the company repurchased $375 million of its own shares and raised its dividend seven percent to an annualized $6.00 per share. The effective tax rate for the third quarter was 14.9 percent.
Wilsonart DivestitureOn August 5, 2024, the company announced the sale of its noncontrolling equity interest in Wilsonart. Proceeds from the transaction, net of transaction costs, were $395 million, resulting in a pre-tax gain of $363 million. Income taxes on the gain were more than offset by a discrete tax benefit of $107 million related to the utilization of capital loss carryforwards which resulted in a favorable GAAP EPS impact of $1.26. The sale is not expected to have a material impact on the Company's financial results in future quarters.
2024 GuidanceITW is incorporating the impact of the divestiture gain and a lower projected effective tax rate for the full year of approximately 21.5 percent into its 2024 guidance and raising GAAP EPS by $1.33 from the previous range of $10.30 to $10.40 to a new range of $11.63 to $11.73 per share. Based on current levels of demand and foreign currency exchange rates, the Company is maintaining its previous guidance for revenue and organic growth to be approximately flat for 2024. Operating margin is projected to be in the range of 26.5 to 27 percent, an improvement of 165 basis points at the midpoint, with enterprise initiatives projected to contribute more than 100 basis points. Free cash flow is projected to be approximately 100 percent of adjusted net income and the company plans to repurchase approximately $1.5 billion of its own shares.
Non-GAAP Measures This earnings release contains certain non-GAAP financial measures. A reconciliation of these measures to the most directly comparable GAAP measures is included in the attached supplemental reconciliation schedule. The estimated guidance of free cash flow to net income conversion rate is based on assumptions that are difficult to predict, and estimated guidance for the most directly comparable GAAP measure and a reconciliation of this forward-looking estimate to its most directly comparable GAAP estimate have been omitted due to the unreasonable efforts required in connection with such a reconciliation and the lack of reliable forward-looking cash flow information. For the same reasons, the company is unable to address the potential significance of the unavailable information, which could be material to future results.
Forward-looking StatementsThis earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements may include, without limitation, statements regarding global supply chain challenges, expected impact of inflation including raw material inflation and rising interest rates, the impact of enterprise initiatives, future financial and operating performance, free cash flow and free cash flow to net income conversion rate, organic and total revenue, operating and incremental margin, price/cost impact, statements regarding diluted income per share, expected dividend payments, after-tax return on invested capital, effective tax rates, exchange rates, expected timing and amount of share repurchases, end market economic and regulatory conditions, the impact of recent or potential acquisitions and/or divestitures, and the Company's 2024 guidance. These statements are subject to certain risks, uncertainties, assumptions, and other factors that could cause actual results to differ materially from those anticipated. Important risks that could cause actual results to differ materially from the Company's expectations include those that are detailed in ITW's Form 10-K for 2023 and subsequent reports filed with the SEC.
About Illinois Tool Works
ITW (NYSE:ITW) is a Fortune 300 global multi-industrial manufacturing leader with revenue of $16.1 billion in 2023. The company's seven industry-leading segments leverage the unique ITW Business Model to drive solid growth with best-in-class margins and returns in markets where highly innovative, customer-focused solutions are required. ITW's approximately 45,000 dedicated colleagues around the world thrive in the company's decentralized and entrepreneurial culture. www.itw.com
Investor Relations & Media Contact: Erin LinnihanTel: 224.661.7431 |
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
STATEMENT OF INCOME (UNAUDITED)
Three Months Ended
Nine Months Ended
September 30,
September 30,
In millions except per share amounts
2024
2023
2024
2023
Operating Revenue
$
3,966
$
4,031
$
11,966
$
12,124
Cost of revenue
2,230
2,319
6,637
7,004
Selling, administrative, and research and development expenses
658
615
2,020
1,980
Amortization and impairment of intangible assets
26
27
76
88
Operating Income
1,052
1,070
3,233
3,052
Interest expense
(69
)
(67
)
(215
)
(196
)
Other income (expense)
379
10
421
40
Income Before Taxes
1,362
1,013
3,439
2,896
Income Taxes
202
241
701
656
Net Income
$
1,160
$
772
$
2,738
$
2,240
Net Income Per Share:
Basic
$
3.92
$
2.55
$
9.20
$
7.38
Diluted
$
3.91
$
2.55
$
9.17
$
7.36
Cash Dividends Per Share:
Paid
$
1.40
$
1.31
$
4.20
$
3.93
Declared
$
1.50
$
1.40
$
4.30
$
4.02
Shares of Common Stock Outstanding During the Period:
Average
296.1
301.9
297.6
303.4
Average assuming dilution
297.0
303.0
298.5
304.5
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
STATEMENT OF FINANCIAL POSITION (UNAUDITED)
In millions
September 30, 2024
December 31, 2023
Assets
Current Assets:
Cash and equivalents
$
947
$
1,065
Trade receivables
3,226
3,123
Inventories
1,817
1,707
Prepaid expenses and other current assets
314
340
Total current assets
6,304
6,235
Net plant and equipment
2,071
1,976
Goodwill
4,980
4,909
Intangible assets
617
657
Deferred income taxes
468
479
Other assets
1,384
1,262
$
15,824
$
15,518
Liabilities and Stockholders' Equity
Current Liabilities:
Short-term debt
$
1,768
$
1,825
Accounts payable
556
581
Accrued expenses
1,655
1,663
Cash dividends payable
443
419
Income taxes payable
205
187
Total current liabilities
4,627
4,675
Noncurrent Liabilities:
Long-term debt
6,578
6,339
Deferred income taxes
129
326
Noncurrent income taxes payable
—
151
Other liabilities
1,098
1,014
Total noncurrent liabilities
7,805
7,830
Stockholders' Equity:
Common stock
6
6
Additional paid-in-capital
1,651
1,588
Retained earnings
28,583
27,122
Common stock held in treasury
(25,000
)
(23,870
)
Accumulated other comprehensive income (loss)
(1,849
)
(1,834
)
Noncontrolling interest
1
1
Total stockholders' equity
3,392
3,013
