Executive Summary
Illinois Tool Works Inc. (0J8W.L) reported Q3 2024 results that underscore the company’s resilience in a modestly decelerating industrial environment. Revenue totaled $3.97 billion, down 1.6% year over year and 1.5% quarter over quarter, while gross margin remained robust at approximately 43.1% and operating margin at 26.5%. The standout item in the quarter was a meaningful contribution from total other income, which helped lift net income to $1.16 billion and diluted EPS to $3.91-$3.92, marking substantial YoY and QoQ earnings per share growth of about 53% and 54%, respectively. Free cash flow was strong at $783 million, supporting a prudent capital allocation stance including buybacks, modest capital expenditure, and a sizable net debt position.
From a capital structure and cash-flow perspective, ITW generated $891 million in operating cash flow and deployed approximately $108 million in capex during the quarter, resulting in free cash flow of $783 million. The balance sheet shows a solid asset base, with total assets of $15.82 billion and total liabilities of $12.43 billion, leaving equity of roughly $3.39 billion. The company carries a notable level of leverage (total debt of $8.35 billion; net debt of $7.40 billion) and a total debt-to-capitalization of about 71%, which highlights leverage risk even as coverage metrics remain supportive (interest coverage around 15x).
Overall, ITW remains a high-quality, diversified industrials player with a durable profitability profile, strong cash-generation capability, and a track record of generating returns on equity well above typical cyclical peers. The challenge remains a modest revenue backdrop against a backdrop of leverage, goodwill/intangible assets on balance sheet, and ongoing macro uncertainty. Investors should monitor industry demand, price realization, and the effectiveness of the company’s cost-mitigation and capital allocation strategies as macro conditions evolve.
Key Performance Indicators
Key Insights
Revenue: $3.966 billion (Q3 2024). YoY: -1.61%; QoQ: -1.51%.
Gross Profit: $1.710 billion; Gross Margin: 43.12%. YoY: -0.12%; QoQ: -1.72%.
Operating Income: $1.052 billion; Operating Margin: 26.53%. YoY: -1.68%; QoQ: -0.19%.
EBITDA: $1.535 billion; EBITDA Margin: 38.70% (implied from EBITDA / revenue).
Net Income: $1.160 billion; Net Margin: 29.25%. YoY: +50.26%; QoQ: +52.83%.
EPS (Diluted): $3.91; GAAP EPS: $3.92. YoY: +53.13%; QoQ: +53.73%.
Cash Flow: Operating cash flow $891 million; Free cas...
Financial Highlights
Revenue: $3.966 billion (Q3 2024). YoY: -1.61%; QoQ: -1.51%.
Gross Profit: $1.710 billion; Gross Margin: 43.12%. YoY: -0.12%; QoQ: -1.72%.
Operating Income: $1.052 billion; Operating Margin: 26.53%. YoY: -1.68%; QoQ: -0.19%.
EBITDA: $1.535 billion; EBITDA Margin: 38.70% (implied from EBITDA / revenue).
Net Income: $1.160 billion; Net Margin: 29.25%. YoY: +50.26%; QoQ: +52.83%.
EPS (Diluted): $3.91; GAAP EPS: $3.92. YoY: +53.13%; QoQ: +53.73%.
Cash Flow: Operating cash flow $891 million; Free cash flow $783 million; Capex $108 million.
Balance Sheet: Cash & equivalents $0.947 billion; Total debt $8.346 billion; Net debt $7.400 billion; Total assets $15.824 billion; Total equity $3.391 billion.
Liquidity/Leverage: Current ratio 1.36; Debt/Capitalization 0.711; Debt/Equity 2.46; Interest coverage ~15.3x.
Valuation/Multiples: Price/Earnings 16.7x; Price/Book 22.8x; Price/Sales 19.5x; EV/EBITDA 55.2x.
Cash Conversion and Efficiency: DSO 73.2 days, DIO 72.5 days, DPO 22.2 days; Cash Conversion Cycle ~123.5 days; Fixed asset turnover ~1.92x; Asset turnover ~0.25x.
Dividend: Payout ratio ~35.8%; Dividend yield ~0.54%.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
3.97B |
-1.61% |
-1.51% |
| Gross Profit |
1.71B |
-0.12% |
-1.72% |
| Operating Income |
1.05B |
-1.68% |
-0.19% |
| Net Income |
1.16B |
50.26% |
52.83% |
| EPS |
3.92 |
53.13% |
53.73% |
Key Financial Ratios
operatingProfitMargin
26.5%
operatingCashFlowPerShare
$3.01
freeCashFlowPerShare
$2.64
dividendPayoutRatio
35.8%
Management Commentary
Transcript data not provided in the supplied dataset. Unable to extract management quotes or thematic highlights from an earnings call. If you share the earnings transcript, I can extract quotes by theme (strategy, operations, market conditions) and annotate their significance.
Forward Guidance
No formal forward guidance was included in the provided data. Consequently, a quantitative outlook (targets for revenue, earnings, or margins) cannot be assessed from the transcript. Based on the quarter’s performance and the sector backdrop, investors should watch:
- Demand recovery in end-markets and any signs of acceleration in capital expenditure across Automotive OEM, Food Equipment, and Construction products.
- Price realization and mix effects across segments to protect margin stability amid input-cost volatility.
- Working capital management given the modest DSO/DIO dynamics and the sizable cash conversion cycle.
- Leverage trajectory and potential balance-sheet optimization (refinancing risk, debt maturities) against ongoing buyback and capex plans.
A prudent scenario-based view would consider mid-to-low single-digit organic revenue growth in a stable macro environment, continued margin discipline, and steady FCF generation as favorable drivers, with leverage and macro exposure as key risk monitors.