ILLINOIS TOOL WORKS INC Quarterly Report for Q1 Ended Mar 30, 2018

Summary

Illinois Tool Works Inc. (ITW) reported strong first-quarter 2018 results, with a significant increase in net income and diluted EPS compared to the prior year. Total operating revenue rose by 7.9% to $3.74 billion, driven by a 2.6% increase in organic revenue across all segments and a favorable foreign currency translation effect of 5.3%. Operating income saw a robust 11.9% increase to $903 million, with operating margin expanding by 90 basis points to 24.1%, largely due to enterprise initiatives and lower restructuring expenses, partially offset by unfavorable price/cost dynamics. The company demonstrated strong execution of its business model, with all segments achieving organic revenue growth and operating margins above 20%. Diluted EPS grew by a notable 23.4% to $1.90. Free cash flow also increased by 11.3% to $444 million, supporting substantial capital allocation activities, including $500 million in share repurchases and $266 million in dividends paid. The effective tax rate decreased significantly to 23.2% from 28.3% in the prior year, primarily due to the Tax Cuts and Jobs Act and a discrete tax benefit, positively impacting net income.

Key Highlights

• 1Total operating revenue increased by 7.9% to $3.74 billion, with organic revenue growing 2.6% across all segments.
• 2Operating income grew 11.9% to $903 million, and operating margin expanded 90 basis points to 24.1%.
• 3Diluted Earnings Per Share (EPS) surged by 23.4% to $1.90.
• 4Free cash flow increased by 11.3% to $444 million, demonstrating strong operational cash generation.
• 5The company repurchased $500 million of its common stock and paid $266 million in dividends, highlighting a commitment to shareholder returns.
• 6The effective tax rate decreased to 23.2% from 28.3%, largely due to the impact of the Tax Cuts and Jobs Act.
• 7All seven reported segments achieved organic revenue growth and operating margins exceeding 20%.

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