Illinois Tool Works Inc. Q1 FY2026 earnings call

• ITW delivered solid start to the year with results in line with expectations, outperformed underlying end markets. - Capitalized on positive demand trends in CAPEX-related segments. - Consumer-facing businesses contended with challenging dynamics but ITW team executed on profit drivers. - Enterprise initiatives contributed 120 basis points to the bottom line. - Progress on ITW's organic growth agenda, specifically customer-backed innovation, aiming for 3% plus CBI contribution to revenue by 2030. - All seven segments projected to deliver positive organic growth and margin expansion in 2026.

In the first quarter, ITW delivered revenue growth of 5% and a 12% increase in GAAP EPS to $2.66. Operating margin expanded by 60 basis points to 25.4%. CAPEX-related segments: welding had organic growth of 6%, test and measurement and electronics had 5% organic growth. Automotive OEM: revenue increased 4%, organic revenue declined 1%, outperformed global automotive bills; operating margin improved by 170 basis points to 21%. Food equipment: revenue growth of 2%, organic revenue down 3%, strength in service partially offset decline in equipment; international business flat, projected positive organic growth from Q2. Test and measurement and electronics: 10% revenue growth, 5% organic growth, highest in three years; semi-related businesses grew over 15%. Welding: revenue grew 7%, organic growth of 6%, equipment grew 8%, North America primary growth engine, international down 6%; operating margin 32.1%. Polymers and fluids: 5% revenue growth, organic growth of 2%, driven by new products and market share gains; operating margin expanded 150 basis points to 28%. Construction products: revenue up 3%, best organic growth in four years, organic growth declined 1%; North America flat, Europe down 3%, Australia and New Zealand down 2%. Specialty products: revenue down 1%, organic revenue down 5% due to PLS activities and delayed Middle East sales; operating margin expanded 40 basis points to 31.3%.

• Raised full year GAAP EPS guidance by 10 cents to $11.10 to $11.50 midpoint $11.30, 8% year over year growth. - Full year organic growth projection 1 to 3% unchanged. - Expect operating margin expansion of approximately 100 basis points powered by enterprise initiatives. - Projection for incremental margins in mid to high 40s unchanged. - Expect free cash flow conversion to exceed 100% of net income, on track to repurchase ~$1.5 billion of shares in 2026.

Q: How's growth by segment versus original expectations?

A: Andy asked if CapEx businesses like test and measurement and welding are trending ahead, Chris responded all seven segments expected positive organic growth, CapEx segments strong with order activity, consumer facing markets challenged but ITW outgrows them.

Q: Impact of GLP-1 drugs on food equipment?

A: Tammy asked about GLP-1's impact, Michael said not a lot of thought yet, QSR not a huge part of business, but food equipment has innovation to offset pressures.

Q: Margin in quarter and 2Q outlook?

A: Steven asked about margin specific to quarter and 2Q, Michael said Q1 had slow start in food equipment but improved, expect sequential margin improvement from Q1 to Q2, more than 100 basis points improvement.

Q: Tariff recovery?

A: Andrew asked about Supreme Court ruling on tariff, Michael said direct impact of tariffs mitigated at ITW, tariff recovery not on radar, not in guidance.