Illinois Tool Works revenue up 11% in first quarter

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Illinois Tool Works/Globe Newswire

GLENVIEW, Ill. – Illinois Tool Works Inc. released its first quarter 2022 results on Tuesday.

“In what remains a challenging and dynamic environment, our ITW sales teams around the world continue to do an exceptional job leveraging the performance power of the ITW business model and our preferred supply position to support our customers and execute on our ‘Win the Recovery’ strategy to accelerate profitable market penetration and organic growth of our portfolio,” said E. Scott Santi, President and Chief Executive Officer. “Our first quarter results reflect strong and continued momentum in this regard, and we remain well positioned to seize the opportunities and meet the challenges that lie ahead as we navigate the remainder of 2022.”

First quarter revenue increased 11.2% to $3.9 billion, with organic growth of 10.6%. The acquisition of MTS contributed 2.8% to revenue. The impact of currency translation reduced revenue by 2.2%.

Six of the seven segments recorded positive organic growth, led by Food Equipment up 28%, Construction Products up 21%, Welding and Polymers & Fluids up 13%, Test & Measurement and electronics up 8% and specialty products up 1%. Organic revenue was down 1% at automotive OEMs due to automotive production limitations related to component supply shortages.

GAAP EPS was $2.11, including $(0.05) of unfavorable foreign currency translation impact. Operating margin was 23.4%, excluding 70 basis points of margin dilution impact related to the MTS acquisition. Business initiatives contributed 90 basis points. While pricing actions more than offset raw material cost increases on a dollar-for-dollar basis, the price/cost ratio impact reduced margin percentage by 250 basis points.

Cash flow from operations was $323 million and free cash flow was $249 million, with a 38% translation of net income due to higher investments in working capital for support double-digit revenue growth and increased inventory levels to help mitigate supply chain risks and maintain customer service levels. . The company repurchased $375 million of its own stock, and the effective tax rate for the quarter was 23.1%.

Based on the company’s first quarter results and projections of current demand levels for the remainder of the year, ITW is raising its full-year organic growth forecast to 7% to 10% and its revenue growth forecast for the full year at 8.5% to 11.5%. The acquisition of MTS should add 3% to revenue. Foreign currency translation is expected to reduce revenue by 1.5%.

The company is also raising its full-year GAAP EPS guidance to $9.00 to $9.40 per share, an increase of 11% to 16% from a year ago, excluding the impact of Favorable one-off tax items in 2021. Operating margin is expected to reach 24% to 25%, with corporate initiatives contributing 100 basis points. The margin dilution effect resulting from the MTS acquisition and price/cost are expected to be 50 and 100 basis points, respectively. Free cash flow is expected to grow 10% to 20% year over year with a conversion rate of 85% to 95% of net income. The company is set to buy back $1.5 billion of its own stock, and the effective tax rate is expected to be 23% to 24%.

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