Key Highlights

  • Third-quarter revenue of USD 4.236 billion rose 4.4%, with organic growth of 3.8% led by 6% in North America.
  • Record operating income of USD 1.177 billion rose 5.9%, and operating margin widened 40 basis points to 27.8%.
  • GAAP EPS of USD 3.00 rose 6.8%, and full-year guidance now spans USD 11.45 to USD 11.55 per share.
  • Electronics organic revenue jumped 31%, lifting Test and Measurement and Electronics organic growth to 16% for the quarter.

Record Income Despite a Tornado Hit

Illinois Tool Works (NYSE:ITW) reported third-quarter revenue of USD 4.236 billion on Tuesday, up 4.4%, with organic growth of 3.8%. Operating income of USD 1.177 billion set a quarterly record, and operating margin widened 40 basis points to 27.8%. Enterprise initiatives contributed 130 basis points of that margin. GAAP EPS rose 6.8% to USD 3.00.

A late-July tornado damaged two Welding facilities and cut revenue by an estimated USD 40 million. Excluding that effect, the company puts Welding organic growth near 15%, against the reported 7%, and total organic growth near 5%. Business interruption insurance largely offset the lost operating income, and the company describes the effect going forward as immaterial.

Price increases and other actions more than offset raw material inflation that the finance chief put at 4% to 5%. A higher effective tax rate of 24.4%, against 21.8% a year earlier, cost about USD 0.10 per share.

Capital Equipment Segments Set the Pace

Test and Measurement and Electronics grew organic revenue 16%, with margin up 330 basis points to 28.7%. Management linked the 31% rise in electronics to customers adding fab capacity, producing circuit boards and serving artificial intelligence demand. Welding orders grew faster than revenue, and Polymers and Fluids rose 8% with margin up 280 basis points to 31.3%.

Other segments were softer. Automotive OEM organic revenue fell 2% against a 5% comparison, and margin dropped 170 basis points on a lag between price increases and cost inflation. Construction Products declined 1% with margin down 170 basis points to 29.9%, even as commercial construction grew 19% on data center projects. Food Equipment grew 1%, as a 5% rise in service offset a 2% fall in equipment.

By region, North America grew 6% and Asia Pacific 3%, Europe was flat and China declined 2%.

Guidance and Capital Return

The company raised the midpoint of 2026 GAAP EPS guidance by USD 0.05 to USD 11.50, within a narrowed range of USD 11.45 to USD 11.55, which equals 10% growth. Revenue growth guidance moved up to 4.5% to 5.5% on currency, while organic growth guidance of 3% to 4% was reaffirmed. Management said that range includes fourth-quarter organic growth above 5%. Operating margin guidance is unchanged at 26.5% to 27.5%.

Free cash flow of USD 851 million equaled 100% of net income. The company repurchased USD 187 million of stock in the quarter and projects about USD 1.5 billion for the year. It raised the dividend 7% to an annualized USD 6.88 per share, the 63rd consecutive annual increase, and returned USD 2.7 billion to shareholders over nine months.

Order and Margin Markers

Several measures frame the fourth quarter: Welding and Test and Measurement orders relative to revenue, price recovery in Automotive OEM and Construction Products, and organic growth against the level implied by guidance. Customer-Back Innovation contributed more than 3% to growth so far this year, against 2.4% in 2025.

Management cited incremental margins of 40% or more for 2027 while noting that annual plans are not yet developed. The projected effective tax rate stays at 23% to 24%.