Illinois Tool Works Inc.
Analysis
Four calls trace ITW from defending margins in a flat market to an order-driven recovery in its industrial half, with guidance raised twice in 2026 and customer-back innovation landing its 2030 target early. The consumer half has not joined in yet.How much of the industrial order growth is unshipped backlog?
- The recovery is real, but only in half the company.
Welding grew 14% in Q2 FY2026 and Test & Measurement and Electronics 10%, with orders running ahead of sales. Food Equipment, Specialty and home construction remain flat to down, so the growth rests on a few cyclical markets.
- Customer-back innovation arrived years ahead of schedule.
New products contributed 3% of revenue in the first half of 2026, past the 2.4% of 2025 and ahead of the 3%-plus goal set for 2030 — management's "a little earlier than we thought." They carry higher margins, so ITW outgrows its markets.Which segment contributed most of that innovation gain?
- Rising material costs are outrunning ITW's price increases.
Resin, freight and electronic components rose in price faster than ITW could reprice, squeezing Q2 FY2026 margin, and the squeeze lasts into Q3. Those offsetting savings are fixed, so inflation eats into the margin gains investors expect.How much of the price-cost gap is expected to close by year-end?
- Orders keep running ahead of sales in Welding and Test & Measurement. That work is already booked, so those two segments keep growing even if the wider economy cools from here.
- New products keep adding around 3% of revenue a year. That growth does not wait on the market, and new products sell for more, so profit rises faster than sales.
- Cost-cutting programmes keep delivering about a point of margin a year. ITW can grow profit even when volumes go nowhere, which is how it set records in a soft market.
- The order surge turns out to be a restocking blip, not real demand. A chip-market pickup reversed once already in 2025; a repeat drops growth back to the flat rate of the past two years.
- The consumer half of the company never joins in. Food Equipment and home construction stay flat, so everything rests on two cyclical segments that can fall together.
- Material costs keep climbing faster than ITW can raise prices. Every bit of margin inflation eats has to be replaced by fresh cost cuts, pushing the 2030 margin goal further out.
| Politician | Transaction | Amount | Traded | Filed |
|---|---|---|---|---|
Donald Trump Republican · Executive | Purchase | ≥$15K | Jul 23 | Sep 22 |
Donald Trump Republican · Executive | Sale | ≥$15K | Jun 12 | Aug 22 |
Donald Trump Republican · Executive | Sale | ≥$100K | May 20 | Jul 1 |
Donald Trump Republican · Executive | Sale | ≥$100K | May 19 | Jul 1 |
Donald Trump Republican · Executive | Sale | ≥$1K | May 18 | Jul 1 |
Congressional trading data provided by QuiverQuant
How Illinois Tool Works turned $16.0B of revenue into $4.2B of operating income.
| Revenue | ||
|---|---|---|
| Automotive OEM Segment | $3.3B | ▲ 3.14% YoY |
| Test and Measurement and Electronics Segment | $2.8B | ▲ 0.25% YoY |
| Food Equipment Segment | $2.7B | ▲ 1.96% YoY |
| Welding Segment | $1.9B | ▲ 2.11% YoY |
| Construction Products Segment | $1.8B | ▼ 4.66% YoY |
| Specialty Products Segment | $1.8B | ▲ 1.84% YoY |
| Polymers and Fluids Segment | $1.8B | ▲ 0.06% YoY |
| Total revenue | $16.0B | |
| Gross profit | $7.1B | 44.1% |
| Operating income | $4.2B | 26.3% |