Illinois Tool Works (ITW) is a diversified industrial manufacturer of engineered components, fasteners and capital equipment with a consistent, cash‑generative operating profile and broadly stable quarterly revenue and earnings. Company Overview Illinois Tool Works (ITW) is a diversified industrial manufacturer of engineered components, fasteners and capital equipment with a consistent, cash‑gener
Illinois Tool Works (ITW) is a diversified industrial manufacturer of engineered components, fasteners and capital equipment with a consistent, cash‑generative operating profile and broadly stable quarterly revenue and earnings.
Illinois Tool Works (ITW) is a diversified industrial manufacturer of engineered components, fasteners and capital equipment with a consistent, cash‑generative operating profile and broadly stable quarterly revenue and earnings.
The company’s cash generation is a clear strength: trailing twelve‑month operating cash flow has run a little over $3.1 billion, most recently $3.16B (period end 2026‑03‑31), and it peaked at $3.54B at year‑end 2023, underscoring steady free‑cash potential (Strategic Capital Allocation). Reported profitability and earnings also show consistency—trailing twelve‑month net income is $3.13B and the most recent quarterly net income was $768M (2026‑03‑31), with quarters in 2025 clustering in the $700M–$820M range—reflecting predictable results over time (Revenue & Net Income; Earnings Quality Analysis).
Revenue has been broadly stable around the low‑$4B quarterly level, moving from $3.84B on 2025‑03‑31 to $4.09B on 2025‑12‑31, which supports the steady earnings base (Revenue & Net Income).
Investing cash flow remains negative on a trailing twelve‑month basis at –$521.0M (2025‑12‑31) and earlier periods showed large volatility (near –$1.0B in 2021–2022), indicating variable capital spending and M&A activity (Strategic Capital Allocation). Financing cash flow has been persistently negative and sizable, easing from –$3.25B at 2025‑03‑31 to –$2.70B at 2026‑03‑31, which suggests heavy capital returns or debt activity that materially draws on cash. On growth, revenue has been effectively flat across recent quarters (roughly $3.9–4.1B), and an outsized net income of $1.16B on 2024‑09‑30 stands out versus the usual quarterly range, signaling occasional earnings variability (Revenue & Net Income).
Key fundamentals include operating cash flow versus net income (OCF $3.16B vs NI $3.13B TTM), the trajectory of investing cash flow (–$521M TTM) and financing outflows (–$2.70B), quarterly revenue around the ~$4.0B level (Revenue & Net Income), and changes in diluted EPS and revenue per share (EPS Diluted & Revenue per Share). Additional focus areas include profit margin trends (Profit Margin Trends) and return metrics such as ROE and the PE trend (Return on Equity (ROE); Price-to-Earnings (PE) Ratio Trend).
The foundation of business quality and long-term value creation
Revenue for ILLINOIS TOOL WORKS INC has been broadly stable in recent quarters, trending upward through 2025 from $3.84B in 2025-03-31 to $4.05B (2025-06-30), $4.06B (2025-09-30) and $4.09B (2025-12-31), with several prior quarters clustered around the $3.9–4.1B range. The dataset includes larger year-end figures in some prior periods (for example, $8.61B on 2020-12-31, $7.36B on 2021-12-31 and $7.98B on 2022-12-31) that stand apart from the typical quarterly pattern.
Net income showed a pickup through 2025, rising from $700.0M in 2025-03-31 to $755.0M (2025-06-30) and peaking at $821.0M on 2025-09-30 before easing to $790.0M (2025-12-31) and $768.0M in the most recent quarter (2026-03-31). A notable inflection earlier in the series is the $1.16B net income reported on 2024-09-30, which is above the surrounding quarters. The most recent revenue was $4.09B (period end 2025-12-31). The most recent net income was $768.0M (period end 2026-03-31).
Why Growth Matters
Consistent revenue and earnings growth are the lifeblood of successful long-term investments. Companies that can grow their top line (revenue) and bottom line (net income) over many years demonstrate they have products or services customers value and are willing to pay for repeatedly.
Revenue Growth shows whether the company is expanding its market reach, gaining market share, or successfully launching new products.Net Income Growth demonstrates the company can convert that revenue into actual profits while managing costs effectively.
Look for steady, sustainable growth rather than erratic spikes. The best businesses compound earnings year after year, creating tremendous value for shareholders over time. Companies that can grow earnings faster than revenue are improving their profitability—a sign of operational excellence and competitive strength.
Year-over-year growth rates for revenue and earnings per share
Reading the Growth Rate Chart
This chart converts the absolute per-share figures into year-over-year percentage changes, making it easy to see whether growth is accelerating, decelerating, or reverting to trend — regardless of the company's absolute size.
Revenue per Share Growth (1-year, split-adjusted) measures how quickly the top line is expanding on a per-share basis. Sustained positive growth signals that the company continues to win customers and grow its addressable market.EPS Diluted Growth (1-year, split-adjusted) measures how quickly earnings are compounding for each shareholder. When EPS growth consistently outpaces revenue growth, operating leverage and margin expansion are at work.
Look for consistency, not just magnitude. A company that reliably grows EPS 10–15% per year is far more valuable than one that alternates between 50% spikes and deep contractions. Negative EPS growth during a period of positive revenue growth is a red flag — costs are rising faster than sales. Quarters where both lines converge near zero or go negative deserve close scrutiny.
How revenue converts to net income for the most recent annual period
Period Information
Report Type: Annual (10-K)
Period: Jan 2025 to Dec 2025
Analyzing long-term margin stability and competitive positioning
Understanding Profit Margins
Between Jan 2025 and Dec 2025, Illinois Tool Works Inc converts every dollar of revenue through the following stages:
Sustainable competitive advantages reveal themselves through consistently superior profit margins over extended periods. Companies with durable economic moats maintain pricing power and operational efficiency that competitors struggle to match.
A sign of durable competitive advantage is earning sustained higher margins than competitors.Look for margins that remain stable or improve over time, especially during economic downturns. Declining margins may signal increasing competition, pricing pressure, or deteriorating business fundamentals.
Comparing reported earnings to actual cash generation
ILLINOIS TOOL WORKS INC has shown a close alignment between trailing twelve‑month net income and operating cash flow over the period shown, with both metrics clustered around the low‑$3 billion range. In recent quarters the relationship shifted: net income exceeded operating cash flow from 2024‑09‑30 through 2025‑06‑30, then operating cash flow has exceeded net income from 2025‑09‑30 through the most recent quarter. The gaps in those recent periods are modest, generally within a few hundred million dollars.
The pattern highlights a brief interval in late 2024 and early‑to‑mid 2025 where reported earnings ran higher than cash generation, followed by a reversion to operating cash flow slightly above earnings in the last three quarters. The most recent trailing twelve‑month metrics are: Net Income TTM $3.13B and Operating Cash Flow TTM $3.16B.
The Earnings vs. Cash Flow Gap
Reported earnings (Net Income) doesn't always reflect actual cash generation. Companies use accrual accounting, which recognizes revenue when earned and expenses when incurred—not when cash actually changes hands. This creates timing differences and opportunities for accounting discretion that can mask underlying business health.
Net Income (the "earnings" number) can be influenced by non-cash items like depreciation, stock-based compensation, and changes in accounting estimates.Operating Cash Flow, however, shows the actual cash the business generates from its core operations—a harder number to manipulate.
What to Look For
Key Insight: Companies with durable competitive advantages typically show operating cash flow that meets or exceeds net income over time, demonstrating they convert accounting profits into actual cash that can be returned to shareholders or reinvested in the business.
Measuring management's efficiency at generating profits from shareholder capital
The Gold Standard of Profitability
Return on Equity (ROE) is a powerful measure of how effectively a company's management is using the money shareholders have invested. Calculated by dividing Net Income by Shareholders' Equity, it reveals how much profit is generated for every dollar of equity capital.
A consistently high ROE (typically above 15-20%) is often the signature of a "quality" business with a durable competitive advantage. It indicates that the company can generate high returns on its own capital, which it can then reinvest at these high rates to compound value over time.
What to Look For:
How the company generates and deploys its cash
ILLINOIS TOOL WORKS INC's trailing twelve-month operating cash flow has been relatively stable in recent quarters, running a little over $3.1B. After a peak of $3.54B at year-end 2023, operating cash flow moved into the low-3s through 2024–2025 (e.g., $3.28B at 2025-09-30, $3.13B at 2025-12-31) and was $3.16B as of 2026-03-31.
has been consistently negative with sizeable variability: large outflows around 2021–2022 (near -$1.0B) narrowed to smaller but still negative amounts through 2023–2025 (examples include -$7.0M at 2025-06-30, -$417.0M at 2025-09-30). The latest available investing cash flow (TTM) is -$521.0M (period end 2025-12-31).
has been persistently negative across the series, easing slightly from larger outflows in early 2025 (e.g., -$3.25B at 2025-03-31) toward -$2.70B at 2026-03-31. The most recent trailing twelve-month values are: Operating Cash Flow $3.16B; Investing Cash Flow -$521.0M; Financing Cash Flow -$2.70B.
Understanding Company Strategy
Capital allocation refers to how management decides to spend and invest the company's cash. Analyzing the three primary categories of cash flow reveals a company's true operational strategy:
What to look for: Is the company bootstrapping (funding growth solely from operating cash)? Are they borrowing to fund aggressive expansion or dividends? Or are they capital raising by issuing new shares, potentially diluting your ownership? A healthy, mature company typically generates strong operating cash, moderately invests in growth, and returns the surplus to shareholders through financing activities.
Net assets attributable to each share — the accounting floor of intrinsic value
Why Book Value per Share Matters
Book value per share is the net worth of the company — total assets minus total liabilities — divided by shares outstanding (split-adjusted). It represents the theoretical liquidation value per share if every asset were sold and every liability repaid at balance-sheet carrying values. It is the accounting foundation upon which much of equity valuation is built.
A steadily rising book value per share is one of the most reliable signals of compounding wealth creation. It means the company is retaining earnings and building net worth faster than it is returning capital or eroding it. Warren Buffett famously tracked Berkshire Hathaway's book value per share for decades as his primary measure of intrinsic value growth.
Context is essential. Asset-heavy businesses (banks, manufacturers, utilities) should be judged by book value more directly than asset-light businesses (software, consumer brands), where intangible assets like intellectual property and customer loyalty may far exceed their balance-sheet carrying values. A company trading at a large premium to book value is not necessarily overvalued — it may simply possess competitive advantages that accounting rules do not capture. Conversely, a declining book value per share — especially over multiple years — is a serious warning sign of capital destruction.
How much of the company is financed by debt versus shareholders' equity
Reading the Debt-to-Equity Ratio
The debt-to-equity (D/E) ratio compares total financial debt to shareholders' equity. A ratio of 1.0 means the company has borrowed one dollar for every dollar of equity; a ratio of 2.0 means it has borrowed twice as much as it owns. Financial leverage amplifies both returns and risk: in good times, debt turbocharges equity returns; in bad times, it accelerates losses and can threaten solvency.
Trends matter more than a single number. A rising D/E ratio can mean the company is taking on debt to fund growth — potentially value-creating if returns exceed the cost of capital. But it can also mean equity is being eroded through losses or that the business is borrowing simply to sustain operations. A falling D/E ratio generally reflects strengthening financial health: earnings are being retained, debt maturities are being paid down, or both.
Industry norms vary enormously. Capital-intensive sectors (utilities, real estate, financials) routinely carry high D/E ratios that would be alarming in, say, a technology company. Always compare against sector peers. As a rough rule of thumb, a D/E above 2× in a cyclical business warrants careful scrutiny of interest coverage and refinancing risk.
Short-term liquidity — can the company cover its near-term obligations?
Liquidity: Can the Business Pay Its Bills?
The current ratio is calculated as current assets divided by current liabilities. A ratio of 1.5 means the company has $1.50 of short-term assets — cash, receivables, inventory — for every $1.00 of obligations due within the next twelve months. It is the most direct measure of near-term financial resilience: can the business meet its obligations without needing to raise new capital or sell long-term assets at a discount?
A ratio above 1.0 is generally healthy, meaning current assets exceed current liabilities. A ratio consistently above 2.0 may indicate the company is holding excess cash or inventory that could be deployed more productively. A ratio below 1.0 is a warning sign — the company is relying on future cash generation or external financing to cover its near-term obligations, which is manageable in normal conditions but dangerous during a downturn.
Trends and context matter.A declining current ratio isn't always alarming — highly efficient businesses (e.g., large retailers with reliable daily cash flows) often run leaner balance sheets intentionally. Conversely, a rapidly rising current ratio can signal slowing sales causing inventory to build, or customers taking longer to pay. Always compare the trend against industry peers and cross-reference with the cash flow statement to assess whether the business is genuinely liquid or just holding non-cash current assets.
How much the market is paying for each dollar of company earnings
What Is the PE Ratio?
The Price-to-Earnings (PE) ratio is one of the most widely used valuation metrics in investing. It divides the current stock price by the company's earnings per share (EPS), revealing how much investors are willing to pay for each dollar of earnings. A high PE can signal that the market expects strong future growth, while a low PE may suggest undervaluation—or reflect genuine concerns about the company's prospects.
Context matters:PE ratios vary significantly across industries. High-growth technology companies routinely trade at PE ratios above 30x or 40x, while mature, low-growth sectors like utilities or financials often trade closer to 10–15x. Always compare a company's PE to its own history and its industry peers, not just an absolute number.
What to Look For:
Key Insight:The PE ratio is a snapshot of market sentiment and expectations. Tracking it over time alongside earnings trends reveals whether the market's valuation has expanded or contracted—and whether that change is justified by fundamentals.