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- **Record Financials**: Q3 operating income of $1.1 billion, 27.4% margin, and $900 million free cash flow highlight strong execution.
- **China Outperformance**: 12% year-to-date growth driven by automotive and Welding segments, with EV content leadership.
- **Margin Expansion**: 140 basis points from enterprise initiatives, 240 basis points in Automotive, and 260 basis points in Test & Measurement.
- **Guidance Adjustment**: Narrowed EPS to $10.40-$10.50, reflecting cautious demand outlook but maintaining margin strength.
- **Strategic Focus**: CBI at 2.3-2.5% (trending to 3%+ by 2030) and disciplined PLS driving above-market growth and margin expansion.

**【CEO Summary Section】**
- **Revenue and Growth**: Q3 revenue increased 3% (1% organic growth), with favorable FX contributing 2%. GAAP EPS was $2.81, up 6% year-over-year. Operating income reached a record $1.1 billion, with operating margin expanding 90 basis points to 27.4%.
- **Strategic Initiatives**: Enterprise initiatives contributed 140 basis points to margins. Pricing and supply chain actions offset tariffs, positively impacting EPS and margins. Free cash flow grew 15% to $900 million.
- **Dividend and Buyback**: 62nd consecutive dividend increase (7% raise) and $1.1 billion in share repurchases year-to-date. Confident in delivering on 2030 goals, including 3%+ CBI yield.

**【CFO Financial Commentary】**
- **Segment Performance**: 
  - **Automotive OEM**: 7% revenue growth (5% organic), China up 10%. Operating margin improved 240 basis points to 21.8%.
  - **Welding**: 3% organic growth, driven by customer-backed innovation. Equipment sales up 6%, operating margin 32.6%.
  - **Test & Measurement**: Sequential margin improvement of 260 basis points to 25.4%, with Q4 growth expected.
  - **Construction**: Organic growth improved 140 basis points to 31.6%, despite flat top-line.
- **Full Year Guidance**: Organic growth 0-2%, revenue up 1-3%. Operating margin 26-27%, narrowed EPS guidance to $10.40-$10.50 (midpoint $10.45). Free cash flow conversion rate 110%.

**【Q&A Highlights】**
- **Construction Margins**: 11 consecutive quarters of margin expansion due to portfolio focus and enterprise initiatives. Confident in long-term growth despite short-term demand challenges.
- **China Growth**: Automotive and Welding segments led 12% year-to-date growth, driven by EV penetration and CBI.
- **Tariff Impact**: Pricing and supply chain actions offset tariffs. Q3 price/cost neutral, with positive impact on margins.
- **2026 Outlook**: Expect above-market organic growth, margin improvement from enterprise initiatives, and incremental margins above historical average.
- **Capital Deployment**: $1.5 billion buyback program, 2x EBITDA leverage, and focus on dividend growth.

Illinois Tool Works Inc. (ITW) Q3 2025 Earnings Call Transcript

Revenue

Sales and Services Revenue

Financing Services Revenue

Other Revenue

Cost of Revenue

Cost of Goods and Services

Cost of Financing Services

Other Cost

Gross Profit

Other Operating Income

Operating Expenses

Selling, General and Administrative Expenses

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Net Income

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Total Comprehensive Income Attributable to Owners of the Company

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ITW

ITW fundamentals

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