Fourth Quarter 2024 Highlights
- Revenue of $3.9 billion, a decrease of 1.3% as organic growth declined 0.5%; Organic growth of 0.4% turned positive excluding Product Line Simplification (PLS) reduction of 0.9%
- Record operating margin of 26.2%, an increase of 140 bps as enterprise initiatives contributed 120 bps
- Operating cash flow of $1.1B; record free cash flow of $1B, an increase of 10% with a conversion of 133%
- GAAP EPS of $2.54, an increase of 7%
- Revenue of $15.9 billion, a decrease of 1.3% as organic growth declined 0.7% in markets that were down low to mid-single digits
- Record operating margin of 26.8% as enterprise initiatives contributed 130 bps
- Record GAAP EPS of $11.71, an increase of 20%
- Above-market organic growth of 0 to 2% based on current levels of demand; Organic growth of 1 to 3% excluding PLS reduction of approximately 1%-point
- Enterprise initiatives contributing approximately 100 bps to margin improvement
- GAAP EPS of $10.15 to $10.55 including foreign currency translation headwind of $0.30
"ITW delivered a solid finish to the year as we outperformed underlying end markets, expanded operating margin by 140 basis points, generated record free cash flow, and delivered seven percent earnings per share growth in the fourth quarter,” said Christopher A. O'Herlihy, President and Chief Executive Officer.
"Throughout 2024, the ITW team delivered a year of solid operational and financial performance, achieving record financial results by consistently exceeding market growth and significantly improving profitability and margins. Building on this momentum, we will continue to outperform our key end markets in 2025 as we build above-market organic growth, driven by continuous improvement in Customer-Back Innovation, into a core ITW strength. 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 2024 Results
Fourth quarter revenue of $3.9 billion decreased by 1.3 percent as organic revenue declined 0.5 percent. Organic revenue growth was positive 0.4 percent adjusted for PLS reduction of 0.9 percent. Foreign currency translation reduced revenue by one percent and acquisitions added 0.2 percent.
GAAP EPS of $2.54 increased seven percent. Operating margin of 26.2 percent increased 140 basis points as enterprise initiatives contributed 120 basis points. Operating cash flow was $1.1 billion, and free cash flow grew 10 percent to $1.0 billion, with a conversion of 133 percent to net income. During the quarter, the company repurchased $375 million of its own shares and the effective tax rate was 23.7 percent.
Full Year 2024 Results
Full year revenue of $15.9 billion declined 1.3 percent as organic revenue declined 0.7 percent. Organic revenue growth was essentially flat adjusted for PLS reduction of 0.6 percent. Foreign currency translation reduced revenue by 0.7 percent and acquisitions contributed 0.1 percent to revenues.
GAAP EPS of $11.71 included two previously disclosed favorable one-time items; $0.30 from a LIFO inventory accounting change in the first quarter, and $1.26 from the sale of the Company's equity interest in Wilsonart in the third quarter. Excluding these items, EPS was $10.15.
Operating income of $4.3 billion grew six percent, and operating margin increased 170 basis points to 26.8 percent with enterprise initiatives contributing 130 basis points. Excluding 70 basis points of favorable impact from the above-mentioned LIFO inventory accounting change, operating margin increased 100 basis points to 26.1 percent. Six of seven segments expanded margins in 2024 with two segments achieving margins above 30 percent.
Operating cash flow was $3.3 billion and free cash flow was $2.8 billion, with a conversion of 94 percent to adjusted net income. The company invested approximately $0.8 billion to support the long-term profitable growth of its businesses and returned $3.2 billion to shareholders through dividends and share repurchases. The effective tax rate was 21.1 percent.
2025 Guidance
The company is initiating 2025 guidance including GAAP EPS in the range of $10.15 to $10.55 per share which includes a foreign currency translation headwind of $0.30. The company projects above-market organic growth of zero to two percent based on current levels of demand, including an expected PLS reduction of approximately one percentage point. Organic revenue growth is projected to be one to three percent adjusted for the above-mentioned PLS. Based on current foreign exchange rates, foreign currency translation is expected to reduce revenue by three percent, resulting in a projected total revenue decline of one to three percent.
Operating margin is projected to be in the range of 26.5 to 27.5 percent, an improvement of approximately 100 basis points excluding the above-mentioned 2024 LIFO inventory accounting change, with enterprise initiatives contributing approximately 100 basis points.
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 24 to 24.5 percent.
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 adjusted 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 Statements
This 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 and specialty material inflation and fluctuating 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, restructuring expenses and related benefits, expected dividend payments, after-tax return on invested capital, effective tax rates, exchange rates and the impact of foreign currency translation, expected access to liquidity sources, expected capital allocation, 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 2025 guidance. These statements are subject to certain risks, uncertainties, assumptions, and other factors, which 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 $15.9 billion in 2024. 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 44,000 dedicated colleagues around the world thrive in the company's decentralized and entrepreneurial culture. www.itw.com
Investor Relations & Media Contact:
Erin Linnihan
Tel: 224.661.7431
[email protected] | [email protected]
| ILLINOIS TOOL WORKS INC. and SUBSIDIARIES STATEMENT OF INCOME (UNAUDITED) | |||||||||||||||
| Three Months Ended | Twelve Months Ended | ||||||||||||||
| December 31, | December 31, | ||||||||||||||
| In millions except per share amounts | 2024 | 2023 | 2024 | 2023 | |||||||||||
| Operating Revenue | $ | 3,932 | $ | 3,983 | $ | 15,898 | $ | 16,107 | |||||||
| Cost of revenue | 2,221 | 2,312 | 8,858 | 9,316 | |||||||||||
| Selling, administrative, and research and development expenses | 655 | 658 | 2,675 | 2,638 | |||||||||||
| Amortization and impairment of intangible assets | 25 | 25 | 101 | 113 | |||||||||||
| Operating Income | 1,031 | 988 | 4,264 | 4,040 | |||||||||||
| Interest expense | (68 | ) | (70 | ) | (283 | ) | (266 | ) | |||||||
| Other income (expense) | 20 | 9 | 441 | 49 | |||||||||||
| Income Before Taxes | 983 | 927 | 4,422 | 3,823 | |||||||||||
| Income taxes | 233 | 210 | 934 | 866 | |||||||||||
| Net Income | $ | 750 | $ | 717 | $ | 3,488 | $ | 2,957 | |||||||
| Net Income Per Share: | |||||||||||||||
| Basic | $ | 2.55 | $ | 2.39 | $ | 11.75 | $ | 9.77 | |||||||
| Diluted | $ | 2.54 | $ | 2.38 | $ | 11.71 | $ | 9.74 | |||||||
| Cash Dividends Per Share: | |||||||||||||||
| Paid | $ | 1.50 | $ | 1.40 | $ | 5.70 | $ | 5.33 | |||||||
| Declared | $ | 1.50 | $ | 1.40 | $ | 5.80 | $ | 5.42 | |||||||
| Shares of Common Stock Outstanding During the Period: | |||||||||||||||
| Average | 294.7 | 300.1 | 296.8 | 302.6 | |||||||||||
| Average assuming dilution | 295.8 | 301.1 | 297.8 | 303.6 | |||||||||||
| ILLINOIS TOOL WORKS INC. and SUBSIDIARIES STATEMENT OF FINANCIAL POSITION (UNAUDITED) | |||||||
| In millions | December 31, 2024 | December 31, 2023 | |||||
| Assets | |||||||
| Current Assets: | |||||||
| Cash and equivalents | $ | 948 | $ | 1,065 | |||
| Trade receivables | 2,991 | 3,123 | |||||
| Inventories | 1,605 | 1,707 | |||||
| Prepaid expenses and other current assets | 312 | 340 | |||||
| Total current assets | 5,856 | 6,235 | |||||
| Net plant and equipment | 2,036 | 1,976 | |||||
| Goodwill | 4,839 | 4,909 | |||||
| Intangible assets | 592 | 657 | |||||
| Deferred income taxes | 369 | 479 | |||||
| Other assets | 1,375 | 1,262 | |||||
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