ITW - Earnings call transcript Q4 2024 | Illinois Tool Works Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning. My name is Tamika, and I will be your conference operator today. At this time, I would like to welcome everyone to the ITW's Fourth Quarter Earnings Conference Call. [Operator Instructions]. Erin Linnihan, Vice President of Investor Relations, you may begin your conference.

Erin Linnihan

Thank you, Tamika. to Quarter welcome Conference and morning, ITW's XXXX Fourth Call. Good CEO, by Michael and our joined Chris Larsen. President CFO, I'm and and O'Herlihy; President Senior Vice

detail During contains full actual Form reports year quarter important X could is company's ITW's about financial today's from over now press cause XXXX the a that XX-K and Please our presentation XXXX. Slide will pleasure my filed this refer reminder SEC our uses GAAP year to results to those the comparable the presentation results the for subsequent CEO, and full President it's in for of statements. that with XXXX contained Fourth release. Please Chris? guidance provide a call, and to we turn forward-looking and measures, more and turn Chris risks expectations. This the measures to discuss to differ is O'Herlihy. directly most to materially certain Slide call reconciliation measures and non-GAAP X,

Christopher O'Herlihy

and Erin, good everyone. you, Thank morning,

X.X levels. GAAP margins to low mid-single In record free which we and QX. X.X% cash to a down flow you in product solid continue QX, organic decline release year. organic ITW is this simplification, than in the the end growth well excluding we execute saw the controlling digits, declined line expand on EPS to $X.XX. believe revenue X% operating morning, turning improved We point, markets, to and a to the positive, point finish press end in quarter were to delivered in markets controllables better As our outperformed that underlying our fourth

in demand due third positive our growth organic Products the demand revenue some growth to steady impact relative revenue were Specialty would the quarter. percentage into in the primarily X.X%. Overall to as repositioning levels seeing held strategic been for of going above we QX, improvement in they had Excluding have line quarter product what segment, was points was of with simplification, $XX the exiting or approximately million X demand came levels

end executing operating the of team contribution XX.X% an billion, down basis points our point In revenues job an addition increase ITW Record resulting margin a in outperforming X%. total despite of than operating solid a were did was to that X% with markets, more XXX income from of of increase enterprise initiatives. XXX $X.XX operationally, basis

of strong capital free inventory, primarily As a cash working with of XX% a income around flow XXX%. result management, conversion to increased net

more a and achieving filings, we're progress and returns results, CBI increased team yield, key the leading X%-plus have financial CBI us deliver another historical our Looking pre-COVID XXXX margins financial of EPS, performance back of position and evident operational I'm X% patent consistently with Automotive on outperformed than differentiated encouraged growth, yield XX% Products on in underlying ITW markets XXXX, whatever customer-back solid operational made Construction our defining key by end we including by deliver strategic we the and of progress by XXXX, as on above-market work environment capabilities, par year Furthermore, record pleased by strength, with achieving delivered are levels. build such ITW in on organic ahead making company XXXX. “Next we financial and in double fueled priorities. In this the indicator and continued a we we still particularly face. We on as XXXX, laser-focused performance, building and as OEM momentum Phase” world-class some segments in into innovation remain our but particularly to and will which

Turning to guidance. our

PLS, of on level usual both in Per and reflects revenue adjusted approach, projection for organic execute of a XXXX at current well again to high We levels our our positioned guidance excluding X%, seasonality. bottom growth are to very top to demand the continue very line. X%

there Although capitalize seeing positioned orders. we yet it should reflected current the materialize. are positive demand improving Having is in that businesses, on some an if signals not well our are these to very reality environment in said are certainly that, we

of EPS the reflects that $X.XX. Our with currency of headwinds, faced are nonoperational a impact $XX.XX guidance translation midpoint fact including foreign we

colleagues concluding unwavering of expected extend executing I our of to from this points strategy Our wish serving dedication to initiatives, want our customers operating another excellence. improvement enterprise margin morning, my is gratitude XXX powered to independent again by basis solid to contribution for remarks global their and with volume. In sincere my

and provide quarter for Now full I'll more year to turn Michael well to on as our detail call performance the guidance as Michael? the over XXXX.

Michael Larsen

morning, good team simplification. record operationally In growth the top a down the X.X%, included and and which year. revenue with line product Starting financially a Chris, you, finish to X.X% reduction Organic QX, a delivered ITW Thank from line. everyone. solid strategic was

our down reduced Sequential X.X%. X% by QX acquisitions from X.X% of translation geographic up X% Total Europe historical currency compared X%, down to X.X%. North and with Foreign added favorably X%. growth in plus sequential X.X%. to growth a revenue was revenue organic and X.X% Pacific declined Asia revenue the On in America. X China, about earlier QX of was up plus revenues basis, year was

GAAP positive margin, markets XXX XPS initiatives driven and X that outperformed execution underlying between with to XXX control each strong increase margin continued bottom to conversion organic further for margin $X.XX. Please achieved and driven of inventory, this reductions contributed we a by by our of greater enterprise of year and performance for including conversion was in cash year-over-year billion, a from management, capital and meaningful flow initiatives targeted the XX% enterprise cash driver points working operating QX, of inventory strong of basis the which the things segment. In contribution cash strong on was XX evidenced basis as primarily X. growth. we On cash and a record points enterprise line, Strong flow operating Slide the to Operating XXX%. summary, flow project to XXXX. as of QX, to income with ITW free our XXX% initiatives, contributed and free record quarterly points.X execute of record focus within net on basis flow by free end XXX expanded record generated an XX.X%, than turn with performance with billion cash EPS segments team of well increased our $X $X.X a

Now let's against as of On against QX X% the segment was and with starting OEM, America plus drive of Europe China comparison EV a plus a organic China despite plus grew Automotive continues to quarter the innovation 'XX. move regional our of market fourth team share, declined growing basis, X% rapidly was to in while XX%, XX% tough including XX%. the in X% comparison results, gain revenue customer-back a North X%, tough down a down comparison market. where in

points, builds digits. OEM For outperformed XXX low as will excluding basis the with the full year, in our to to X% the data, PLS, to to are relevant XXX relevant by that X%, we in similar auto compared be down typical that XXXX outperformance projected segment industry to grow in expect X% single X%, and build Automotive markets project we builds

track to Automotive On basis couple margins goal the XX.X%. the next on of to year, XXX to improved remains achieve bottom full firmly operating of OEM for years. And its margin low points mid-XXs line, the segment the over by

growth X%. grew and Food almost Turning of X.X% as grew service X. Equipment organic equipment X% to delivered Slide

flat. institutional As of America this support the expand markets in long-term region, to X%, are growth digits XXXX capacity up above-market end the grew in made service attractive the investments North single first business half with growth high essentially in and restaurants off. By very and paying

was revenue X Asia the of as strong turned & Our international Measurement grew positive and Test for to flat quarters, Pacific up first X%, strong rate X%, with business pick organic up quarter up equipment semiconductor and X%, Europe XX% up. with growth started the Electronics' Measurement & of activity was to due the in time growth sales. Test electronics as X% essentially XXXX electronics since fourth highest and with

through on XX%. talked list expanded to positioned growth a customer-back our cycle, basis before, take the of in shape. to quarter points attractive we long begins we investments, in by remain Operating XXX of focused because electronics about including growth well recovery As capitalize to semi the have very innovation opportunities the margins

Slide down X%. were improved X revenue of organic as essentially quarters flat on and was flat Organic to subsequent after Welding consumables X. was growth in year-over-year Moving declines. Equipment

markets a basis and to declined points growth Europe a geographic X%. While some was of North again with X% correlated discretionary on grew up adoption the Framework gain XX.X% XXX strong point view, up market example and a consistent of down On is with than prior showing North be to gives to very was X% that basis. targeted international X%, down of this about America is more our over consumer X%, X%. point-of-sale efforts a down strategic Operating was contributed In from which X% to XXXX, divisions demand. of more X% our margin America improvement relevant revenue products, year. Polymers pipeline Organic the Polymers result international ahead new Automotive outgrow efforts. Throughout which strong & of of CBI share and growth X%, X% continued X end in Fluids. basis, end data Fluids how aftermarket, with with growth. benefit a a ability to tends market grew the as was Phase” innovation Welding team CBI which “Next indicating our and solid grew the our a customer-back China great spending,

with outperform backdrop, positioned in launch on as most with was mid-single as X%. about residential for well new of XXXX we gains. about new strong organic In in expect products down outlook to X XXX contribution markets segment, the Turning was uncertain tough Construction our be market remains Australia, a was to U.S. of improved digits. construction down X. down with to with share down significant down be Europe another QX. down from was new that Slide initiatives. to that Products, Construction execution North X% was housing low ahead X% X%. The With were XX% Construction the enterprise margin the a construction basis interest expected of down in and approximately we're Operating and in about housing Products X% points market starts Products market X%, sensitive in down globally renovation end the New market flat points XXXX and X% commercial Zealand In globally starts rate America, growth to down X%,

Specialty consistent segment the above-market expected, continued reduction PLS growth. a strategic necessary to organic team with as was down strategically from As this reposition to Products, in for actions revenue X% revenue planned the take X%

which gives been While has record Operating X% XXXX we the XX.X% XXX progress and far the and derive a a growth organic was for of points, PLS. encouraging of you work so complete, the than improvement is from value more with of quarter. financial sense basis margin strategic the not margin

XXXX Slide X year to Moving full results. and

around from customers world you've year, high As continue the ITW and seen to our our execute enterprise. for the for all at level colleagues a

a invested growth that in returned consecutive productivity key form and performance dividend term over remained core ITW after-tax share than results and the XXst to billion above-market record earnings, consistently X%, return accelerate and our delivered we capital. Throughout of in of we operating and profitable such projects focused highly dividends our As efforts, on repurchases. the margin in we outperformed sustained year maximizing long and metrics, as shareholders for XXXX, businesses. We as by result end $X.X and more the markets raised organic their growth on performance on our

an Moving strategic key X Slide update to on our of one for priorities.

less excitement the CBI one X% is on filings the pleased to we've the of particularly yield recent framework a than further We “Next XXXX energy point divisions, market. As of those today said, CBI patents most fuels our we've innovation before, divisions. Chris revenue ability to XXXX. We're divisional positioned launch and drive pace customer in as for the can they by The fully implement we're And as in based driver required to market past will high-quality plus our pain teams our we of in CBI customer-back from our increase known deliver growth in represents and XXXX their XX% few one well years, the from the And talked Phase” grow the and is feel ITW. In to tied consistently our every over share on because our for each in yield adopting with patent improvement in XXXX, in gains revenue pre-COVID to future. ability above the consistent revenue expanded Framework impactful about penetration Framework. CBI work a X% continue our with CBI X% new XXXX. of opportunity of to of

full and guidance Slide to year for XX move our Let's XXXX.

our level see, to our end ITW basis margins to outperform can aim as strong XXX any you is at again approximately improve positioned well high As point, Enterprise execute seasonality. and Initiatives. Per levels of in demand and adjusted a is projection we X% points contribution current another usual once percentage process, organic from scenario strategic markets of with our by for to X%, or to growth X X% of on typical PLS excluding based X%

translation currency top X% a headwind. current at Foreign rates represent line

volume projects and operating XX.X%, expected to XXX points XX which enterprise approximately includes about by to is a are contribution margin from each basis improve basis In XX.X% in terms related to basis to that segment. to of of XXX range points initiatives points XXX of from profitability, independent range

EPS which foreign usual tax to of including $X.XX expenses an list GAAP range in increased rate $X.XX of headwinds, income the projects are and $XX.XX, XX/XX to expected from to $X.XX XX% a translation impact, to higher of than tax range of unfavorable XX.X%. ongoing the We with front-to-back projecting expense $XX.XX restructuring longer nonoperational in and includes currency tied

headwind nonoperational year. an be foreign last of EPS would $X.XX of versus midpoint, $XX.XX X% the the currency, from Excluding at increase

we EPS year, second and expenses In XX% typical QX which about from to split to usual restructuring terms expect to the below EPS the first in slightly year. XX% half as the we half of to for due in increased the our QX, therefore is about contribute to revenues, QX XX% of cadence expect our XX%. the a first XX-XX, of compared down half year's EPS, step typical with Combined XX% sequential of

strong share back plan allocated expect shares we active we than is capital as to framework, for repurchase billion mentioned, an buy cash capital greater allocation in flows our I And with of XXXX. net As disciplined free conversion surplus to own X.X program our income.

not is experience, result costs does a of response in potential sell of tariff mitigates and account implementation adjustments we a on recently most range for manageable XXXX, Our strong higher and made that price across we equation comfortable wide by XXXX once where tariffs. the adjusting guidance for in to Based price/cost to as ITW positioned of our that operational react again, past are capabilities, response largely read tariffs. to as and believe we pricing our necessary, ITW's the produce scenarios. in impact, any strategy we're

Turning organic to our our last slide, Slide XX, for XXXX growth projections by segment.

I'll outperform contribution is it you. summary, turn segments from to underlying based of their X execute satisfied into growth Erin, XXXX. improve to also their mindset, margins continue X improvement consistent our positive positioned markets well again well another to segments outperform that, segment to and see, can our you margin our markets rates As solid continuous as are projecting adjusted with are end current And run seasonality. projecting enterprise every with is heading initiatives. In end on profitability. With they typical in XXXX, for and segment positioned organic again never improvement, back Every

Erin Linnihan

the you, Michael. Thank line please Tamika, for open questions.

Operator

first with Stephen Your Instructions] of the is [Operator Volkmann question from line Jefferies.

Stephen Volkmann

here, things Michael. of couple A

initiatives I on think top on range kind level? but of the a various of enterprise just you the gave you I But where the too out initiative impact can down. slow and maybe benefits to enterprise of call write was bottom it segment segments,

Michael Larsen

Day think would largest to I our be said Yes. back improvement might OEM segment. XXX We've there as The going about Automotive expect, in plan margin impact, the points in you talked XXXX. I Investor basis

expect kind then low you of that's where margins in lower range. And like opportunity XXs, that something XX would maybe operating be the points at are would Welding the at probably that basis segments largest in maybe already end, the And so resides. plus

is of So that's a to volume, think which our for place a pretty XXXX. -- into which driven of enterprise opportunity point one further kind has I is in uncertain independent important improvement of know great the I the margins are segments be that every going by initiatives,

Stephen Volkmann

Got it.

it's then us That's segment couple illustrate for kind just projects you Wondering even a the kind Okay. I is CBI. of just bigger that CBI? the if there toughest specific of that think or the to thanks for of maybe one maybe on call of Great. a picture, And could out very power slide explain.

Christopher O'Herlihy

Yes.

great very as is here, So all let's seen Steve, company. Welding, in the across I certainly on would few increase X XXXX, working coming But we condition by in we've right into will XXXX, impact some but very a calls say and more increase XXXX. different different that going call mitigated The one, been the Welding impact basically represented great come to segments. from well in very in CBI where intentional But obviously, portfolio. a that new broad-based on a across having products specifically division called to pipeline X% Every has every We is XXXX. nice of way. what across in I a you Welding. see And contribution progress this market Welding in it in out have we've innovation out segment, made steady a XXXX market is call

Operator

from line question Scott the Research. Your next comes Davis from of Melius

Scott Davis

with off amazed Auto understand that just let's it just in often volume products? kind take us new you any is of doesn't is if down look Auto think new I of I'm price performance big happen break guys. your you're is -- you special kind helpful? benefit, your efficient benefit, of and to product sauce unless restructuring I labor not kind or this you of example. how really to as down environment. working, for case I which very or down increase in like world, mean, -- our When mean fixed would better Are something a a you're an can there's can assets? way coming you mix with it it the your at parse really in more just margins kind you margin getting be Help

Christopher O'Herlihy

Yes.

like important volume sourcing. These bottom-up meaningful this out, XX/XX less an individually. But DNA real and very these here. and very practice would not kind what driven XX are terms a Day in independent is specifically, which, we improvement a And than divisions were of part margins when that at whole are recovery, in in our the people Auto front-to-back enterprise going obviously, called a drivers were this we're to of volume really of to very, of be improvement now on Scott, components And drives visual million margin quality continues very at much margin contributor the say ITW's an Most add and that's by lot we granular the Investor $X.X be we other So driving initiatives, of and a in results. the outcome our divisions, then delivering they the obviously, been we've it strategic called to Auto think main at somewhat Really, But to the our those. I really we projects main moment. how these what's -- getting those initiative higher areas across But consider mindset about to initiatives of initiatives CBI. are kind and strong on level. Auto. Enterprise of in as be that's really while. continuous talented very up for of just you -- much have enterprise of really number and

record we over lot would do. indicated the these much So last is very enterprise our and our to divisions respect initiatives are of in they years, ownership they divisions a -- done with said what we XX accountability initiatives. And here, track the around as have visibility,

all So believe sustainable. these we are

back fundamental our say is accountability, continuous of culture. improvement our On this it's the ownership that to hardware The into strong mindset and now would we divisions.

this keeps on say front in be something we done many -- that we will of to you've never heard And XX/XX as the is occasions, the case back, giving. on with. gift It's us

of impact, points us So Instron our out with businesses, sustainable mindset number also is we out simplifying that impact to to of PLS, Michael has ultimately and elsewhere this on valuable we've also less. Auto, and get contribution a of is in of called a continuing. Obviously, been in simplifying growth call, a of that's projects as own lot improvement the XXXX resources, that, PLS XXX we which higher times just portfolio to where from our the enterprise whole but that that's our CBI. And terms us, enterprise we a across or has all we Auto. what initiatives, terms one in allocation margin a pop fundamentally it's of continuous do from not have exists -- other makes standpoint basis clarifying this initiatives again not see In the called just those of aspect fundamental margin of grow, year payback the have as but it

Scott Davis

best lots in you've past because of overstating widget that to stuff lots would helpful. the owner That's guys little I'm guys, can your I And you this and that think, stuff Okay. different arguably of different a and I be know you seems that. M&A to be I didn't but And transferable, have view businesses. be prepared a in happen successful can lumpy, maybe skill running been mention remarks, but for

pretty would you'd set, and guess, holding on Just you a have it confidence the wide back Is fair set? Is a it point? I of your what's opportunity that win on my M&A? organization kind I little is with in price? amount color a could of it Is integrate think you

Christopher O'Herlihy

Yes.

what our we've management think financial fits criteria. disciplined and terms outlined, of We in our strategy. view we have clear as strategy and clear, a a portfolio certainly well-defined would remain terms pretty I say our basically, of of M&A, in we

is being to X% on margins. business growth quality question would long-term model extend right then improve plus minimum the opportunities. that finding at potential really our it growth about the focused We're acquisitions and a to So able high-quality high leverage

ongoing So basis. we review I opportunities say on an would

we organic we we terms We But in aggressive our that in to reviewing opportunities. the that are businesses. I of an have extent here, are pretty say home opportunities us. selective appropriately growth for boxes in find to potential core right would going find in back we'll active. a that the And the them. And X MTS years us. then ticked largely pretty the for example although all the really of is active opportunity the be very given assured, we met We to run look -- basis And But be the that really are at. And the need this to just out was that all turning on characteristics we we're rest in it right pursuing opportunities.

Operator

the Your Andrew with is next from Group. Citi question of line Kaplowitz

Andrew Kaplowitz

up So X.X% from Chris But growth run mentioned 'XX. historical. or Michael, QX to was your was based that current than I for And orders picked forecasting sequential know commentary intrigued your segments by I Chris your QX you're that haven't on rates greater yet.

out did January, did forecast So you end in within you're out? beginning Test call Is sales You year, else is the Do of that through see recovery & you that's seeing? the calling worth any continue? better semi momentum anything yet Measurement. through pickup there

Michael Larsen

I think here call Andy, for little a recovery probably, to sure. Yes, early a too it's

some seeing out are We called signs. positive semi-electronics. We

fourth we usually saw do. pretty Going through that December, the a solid we quarter,

don't to get this ahead And point. too want so here I far of at we think ourselves

that, if run just want the market can far control. of if X% outgrow second to say, So we side. inevitable underlying the I the X% we're there, our the opportunities. And always continue out conservative of talked going ex PLS in we've take do, But position improve, We're would modeled, And don't to -- And too focused suggest turns growth there possibility, that positioned ourselves. demand would we're in really is on to that initiatives. We get picks that if a as on on should those rate. when up markets. certainly, indicators advantage a the to conditions half, great organic external some be ahead about improvement if based we that be enterprise we well and from to to be certainly things margin the recovery to the case, are happens

positioned So kind how we've that's of this.

Andrew Kaplowitz

could give It's continue more impressive. you China? automotive. very in helpful, color mean I it's [indiscernible] And outperform your China Obviously, very to to been into on ability focused Michael. it's us

just maybe So about talk that.

you really something levels versus said about CBI what think it 'XX maybe that that's automotive helping else? doing? general, in of but in And already or you or expect in you're outperformance similar 'XX you China I automotive is talk

Christopher O'Herlihy

Yes.

built Andy, relative the to we've this, performance to the in quite our part really CBI -- of significant. is on China many made So speaks right, team China has And a And China years. over you're in our been it we've performance investments China, going large has the in been of a in in automotive the particularly while. that growth EV for quality in

You by it outperformed year, this saw again we where builds points. in China about XXX basis

the resource the next put we've are model what made, in China from us that margin a and year but a even of on not on that China just we application investments in position, really We revenues, to world. in to back best-in-class elsewhere much the performance are that's pretty automotive base, the in in innovation margins the similar China expect really they outperform similar business in our standpoint, see

of factor the organizational capability we business growth model, a the really that innovation it's build So in across and China.

Operator

question of with Jeff from Vertical next is Sprague the Research. Your line

Jeffrey Sprague

of going to in interrelationship Regardless construct. wanted PLS just margins how your and there's a XX about CBI. right, good to I be always your think with the are,

on on reloading that's X% we of as And build think just that should the headwind case, PLS definitely about the if set? we be constantly CBI the and of PLS of opportunity CBI of of kind know, the kind kind should just it, also secular thinking benefits other So equation? side I don't

Christopher O'Herlihy

Yes.

to about and in us. value think, I refresh, we and think how our for product simplification So maybe of and philosophy terms accrues that the just

embedded around an . And benefit PLS that part a deeply even from in -- much say, portfolio very has term revenue certainly that goes in standpoint impact also divisions will just on that's front-to-back clarity, standpoint, requires from been of enterprise [indiscernible]. that, would not essential products. strategic the a implementation and And of trade part again, we've review and the get around long of got all sure, CBI, growth margin the positive I from customers critical of from PLS critical Jeff, ultimately a division's much is lot for but well So of provides initiatives. always that improvement resource benefits pretty PLS this very course, there's which clarity strategic deployment executing that a of a for ongoing of component a meaningful this XX/XX we in though us savings our is our really help the PLS, us and effective for and short-term kind cost pruning most are a but our the ultimately discipline, CBI. Then there's but implementation. helps And which -- trusted here, understood. It methodology get which indirectly proper on

will But business us on on and and there's say, ongoing on with much activity of a this so Specialty much divisions. expertise an it's specific doubt would we out value-creating experience PLS, clarity And And no like a say an but year, basis. I this the that ultimately for our that that execute this, CBI. have I enabler in an so of in of we our ongoing we comes PLS very on very kind overall saw positive around be PLS, way lot

Michael Larsen

well, the was was little a of XXXX Products. done rate was that which point, may entirely kind year higher I Products. the into work normal We're little Specialty primarily by I higher do outcomes and a in talked in maintenance And Automotive, work of add, bit as point momentum run if segment. more and just about this to X.X a in Jeff, in going in then little XXXX than PLS Specialty our that Construction about bit a the And driven

kind think I rate early of a point. think is kind new, one whether secular called it's about is to where I too this tell of a the run now it, you

early say. too I think it's a little to

we outcome of this doing how trying manage we as from said, to through we'll and the year. up the run businesses. rolls that of number Let's thing financial an see But not We're and Chris it I value kind get this because PLS we businesses. our think important these to in then know what strategic next is, the year is derive

Jeffrey Sprague

little right? be change are Canada, just region, would lot a kind even XX-day you chain, Auto, one interesting? reprieve period? going tariff-related in just the in supply Mexico, get of cooling for this but maybe in on patterns, then people order of be to scrambling that could And other right, But seeing unusual Great. in on tactical U.S., region, a region, in front the this week. off here Just of be you maybe any seeing might of expiration any like noise trying maybe

Christopher O'Herlihy

us would affect this EPS Jeff, whatever Yes, look, week it's mean, I all But it's I would react and we're to a this to choppy along, front. honest, year. been obviously, the is pretty tell. to well say too say not here that for we're be to is comes early confident positioned I on really read tariff really that and

Michael Larsen

take this. these of Right. And be to and priority through geographies. our We're uniquely all in as positioned that's we assets we manage have going to customers, care

Operator

line question Jamie is next Truist with of Cook Securities. from the Your

Jamie Cook

I back again, guess Auto, just X One, just question. on questions. another

Just the second been driver? And great Obviously, more a it's to or more shift been my you. I back might a that we headwind wondering definitely it just such business getting question, then EV, high you CBI for XX% If the pushed don't be growth but has content as to that, just focused get obviously, think about out to potential to could maybe margin seems under be want about be what it you. great We on story Auto too Chris, CBI. versus do would ICE But Auto it's given or trying to talking the just some to gets target. we're criticism predecessors. say, plus relative say I more you're more, your important, press for

target? a say just your So about on that there? is just And anything of confidence want level you or can anything to you function it say volumes

Christopher O'Herlihy

Yes.

often be And higher. the versus the the healthy start Jamie, We would from CBI CBI margin . And margin ordinarily, we perspective, question, margins to likely posing, our on to tend impact me new I say that we our that you're products, of both hand expansion. I whole out hand. first, and I when margins because where And think organic invent is I have be respect would highest let also think historically, even with an could. organic margin So growth businesses. with growth to differentiated in enabler go been and which demonstrated if margin had businesses fastest-growing we margin say coming and our pandemic, actually growth

were a in we period, like long to term. to strategic in at X-plus marketing over grow position focused in While us way very the innovation that investing and resources percent

for So comes which we this in incrementals, natural businesses. business our high-quality of can really I the organic growth a down it applying to to, of really about these talk organic outcome deliver us, fact of often growth. we that as is at high The portfolio ITW, model quality mean,

math is the simple. So pretty

we plus margin is in incrementals, more we XX% that's And expand effectively, XX%, primary fact, XXXX. is to growth much at to operating structural in paved with our have Given than leverage the margin. why our XX% XX%, reduction. as path cost is with role And then pointed this out,

in high our the the to incremental appropriately healthy of drive enough differentiation on gross we healthy invest more our investment businesses in that, of This while Given margins. to than and help continued margins. delivering portfolio, margins. very in have CBI firepower course, levels still operating growth, very And of provides expansion back

Michael Larsen

about about from us, versus think Jamie, of the same. this EV transition you I transition asked to is pace EV. kind think, And I of for vehicle our ICE ICE -- And the the per the content then at point,

about profile margin is same. the Our

been, where agnostic about been vehicle at we growth we've China, terrific. the any really are well Obviously, on in as particularly has we've to the And point. versus per in and fairly really content so has ICE times this positioned, many -- mix this talked call, been EV growth

a we at see as point, the company. So for this major issue don't this

Operator

Sachs. is of Goldman Joe next Ritchie the from with line Your question

Joseph Ritchie

much on the earlier customer-backed just margin I segments of contribute -- curious for which the how it guess stages how to about innovation. So or PLS has PLS your furthest in I'm it? expectation XXXX? And expansion? the are much the behind on XXXX been that CBI and Like PLS just in implementing talking very then interesting. side, did like and is maybe contributing how much is commentary

Christopher O'Herlihy

Yes.

disruption contribution given obviously, innovation Welding energy And necessarily But another it the answer I enterprise the your Obviously, Joe. that range, change terms generic contribution the fertile where on Food very innovation So in say methods. Equipment, the in margin -- in to it's savings. automotive initiatives, I'd overall then from XX-XX developed back end of for context so directionally, in varies I obviously ahead, question markets referenced of space standards PLS of and level in the in year-to-year, portfolio. segments kind standards. of in improvement control increasing those require area across quality new right see and already. being I CBI, & out materials X new the are Test broad-based markets we significant Measurement are would are Electronics, On to and a stringency now. water on working this test of and we that further Automotive, to call the CBI like on I say. said, All improvements. If have making probably ones was

would of see assured, improvement But an where that's say. we've a I success, in as lot X contribution we'll go had we rest another So area innovation forward. segments, early all

Joseph Ritchie

do just That's more. you're one buyback this And with I planning X.X helpful, recognize Chris. if the to billion in I maybe year. follow up could

in position. at balance a look right take sheet it's a good You now, your

lever like aggressive shares? to would you another just your consider back do doing maybe wanted a be you curious, pretty easy turn, would maybe you I'm a to bit little off more it scenario for aggressive what If under buyback. buying more

Michael Larsen

Joe. Yes,

our the this going surplus billion what of year year. estimate company this X.X the So that the be for to for is best capital is we've penciled in

do we've once we've of I performance gave it's what the the today, we And capital, dividend, extent exceeds is is for share productivity, would margins funded once company that top left what's that the still X.X have and we remarks. growth to opportunity the my So any we our that program. then also the on share repurchases. guidance in investments line acquisitions paid buyback typically internal fully and obviously, or you goes surplus of whether kind allocated excess said the or as to billion capital allocate than working higher And to

today, maybe be number billion company the extent at that. the the So could least way better is than we you out it's the think X.X what to performs higher laid X.X billion one about to and than for

adjustments getting to rate I interest just some here, last over structure, response year-over-year. to think I'll without our in higher if we've a I I few expense think point capital good rate of too really interest our terms quarter being the may, -- fourth the in And technical made in down interest years environment.

interest XXXX think are would for even pretty rates kind about, you slightly is that Our peers compare at other think I to maybe down the if projection flat talking are despite I that higher. And favorably. look significantly of fact what just

at capital for of terms this enter optimal changes in capital major point or allocation we capital in in into so place matter any we And would structure as pretty that do foresee terms a of XXXX. we're in say structure, time not and

Operator

question Zakaria JPMorgan. is from Tami next Your with the of line

Tami Zakaria

remind I reason imports Canada? you very to it's can on early back tell. which us that exposure in countries impact I some and you imports and direct like China appreciate how too the The time would numbers asked, did to the also your Circling from that Mexico tariff helpful. and But around topic, the from last of XXXX, provide P&L EU was

or So able to now? anything willing you're to share

Michael Larsen

Yes.

and usual less in imports China, you our a domestic think account Mexico to with combined for caveats, just of I give kind spend of -- from the than the all U.S. way XX% I'll Tami. Canada about this, I'll here think The

Canada So X%. China, Mexico X%, it's kind X% X% range. of -- mid-single X%, in the digit,

those slightly Europe, obviously then that's and -- X. for So equation there. different But

as add probably of is well. impact which that a recover moment, kind $XX China. back -- we for least XX% pick China okay? get a So million, you little and million margin to do $XXX increase imports price $XX up So roughly from of than that of the go more means have to bit at let's million just and

So billion a the -- and think company. I is $XX this

take based our a read doing that's level, differentiated a the why on coming same I increases. offset as ability actions of We've of tariff-related coming our period cost we by positive material customers, game react thing sit care of will those our inflationary to divisional very our COVID, businesses, produce nature equation. and very the some is our place execute price given inflation to ability the cost the sell here feel and manageable tariff-related experience feel a with 'XX, that cover of So strategy, about kind to 'XX. And pretty out way, out got of we good we where this in think combined with at we today, plan ability like,

So in of pretty can much good in we feel we're any think we a sit like today, scenario that spot. we as here

Tami Zakaria

Got it.

So for follow-up. for noise, expectation tariff-related the year in price/cost a quick what that's the embedded is this guide? Minus any

Michael Larsen

Yes.

been basis cost I it's normal favorable from increases price and a think, standpoint Tami, price/cost with we're we kind of kind a of well. back in dollar offset a Historically, have environment. as slightly also on margin

offer, So products we're here offset to good keep and the any services a position the -- price get value increases. the of in to cost and mind in that potential given our performance we that

Operator

question Mitchell is next of Julian the from Barclays. with Your line

Julian Mitchell

said on the about Maybe mind share what year? the QX you bear just you'd Slide anything movement top And first earnings. the any call segments top of when around I of should out of weighting? question on the first sort Anything at of cadence? looking the sort Michael, line line in sort we understood, XX half

Michael Larsen

Yes.

Julian, typical seasonality. to refer kind I'll I of think, typically, the

and about in $XXX over that's X% little QX 'XX. points we from currency by about kind of down sit That's adds X%-ish pressure. another rates, and as million. a that that's foreign growth, If then today, here that sequentially of with And last happens, more to a little organic X in with 'XX so happens of usually revenues QX year what declined bit

there to of you've progress year. QX the down Margins and X% now range. through kind end start So as that revenues we got the of in from in out go at kind X% lower typically

QX headwinds restructuring the to is the currency flat, related front-to-back goes Just QX pickup like by somewhat QX projects QX, line, from we way, of in the about again to to including XX/XX savings, payback kind second up of half XXXX less a beyond have and first first QX. And then first rate up nonoperational projects feeding top to that all quarter. higher year and tax than on these QX margin have another there's we that the quarter, then are enterprise headwind half. weighted more improvement bit a That as in are putting the we be every well will and that the the the are these -- towards little of

up, combination QX just of QX that headwind of and of going all EPS tax rate. headwind into higher higher maybe $X.XX $XXX relative add you So then $X.XX to EPS, another probably million restructuring and from the revenues, expense a

for year of gave XX% the quarter. we number that that the first that's full you So

helpful. that's hopefully, So

Julian Mitchell

second. was call maybe And the focus year, on Specialty great. wanted That first, a eye, fourth for seems normalizing somewhat a quarter. few segment Products last that sales on of quarters in be to to one it, definitely That's the perhaps the caught just

ahead it for there, in So looks thinking Specialty? plan margins more the on what or flesh there lot kind with ahead? and please? restructuring details Maybe reorganization year just out year Specialty how PLS the we there, like? any There's going are about in And on of a the is

Christopher O'Herlihy

Yes.

when then areas being as like And in And impact PLS. some XXXX, carryover about that were XXX repositioning for certainly saw, despite in long-term time significant portfolio a on but this expect as Specialty you 'XX strategic QX, a doing growth. some was in the at in basis in we growth points. There's as through packaging and So Specialty you called and [indiscernible] is on. strength areas XXXX, in beverage done we out very demand this in so solid all pointed all strong food out, like the equipment year, and Julian, we some aerospace

to make also in doing to that. well is term. expect Specialty And the objective the segment And in XXXX certainly way a grower we're in X% long on on based margin our improvement this XXXX. performance, We here

Operator

from Wolfe Nigel Your of next with line Research. question Coe is the

Nigel Coe

segment, just XX OMX particular, depressed I midpoint on below just general where [indiscernible]. make and perhaps don't could half at to see but about any provide talk sense in the by comments just bar? into guidance I wanted the Just to And margins, XX%. rate bps where the you and the you know given in you for of margin expansion margin best Auto opportunities try those you the [indiscernible] to and dig close relatively first wanted if

in what seeing So just wondering specifically? auto you're

Michael Larsen

Yes.

projection what based to time, us, would really in segment. on [indiscernible] margins our bottom-up what to is But give margin I And that We So, of of expect we on I kind we tell one Nigel, by can from based that the received Chris XXXX. told we see. they like segments at expect every you're not don't right. improve that's our segments what you guidance and

And so are segments the that -- the journey I obviously, of a are little terms further in that businesses towards the along XX%. think,

-- if do, you So the incrementals, at get less can Automotive. in for those at a too getting if little without you just Welding look example, it think margin about you XX% -- than of welding, I think growth because be challenging bit improvement detailed, more XX%, -- you in

the a the in here XXXX not Now low that's fact, on down you're right, from is big And the market of counting -- in in a digits. we're single we're driver lift Automotive, on enterprise counting lot in initiatives. here

margin improvement call of -- automotive basis margin really the what's XXXX. improvement it, that's in it's fueling points XXX that in so in And

than are margins. incrementals to That's the going And XX% really quite of that's term through, margins more that's to starts our And where standpoint, a growth than control it Products, improvement you if more historical of try that's up to a a suddenly XX% when leverage. operating got in we've a things that little X% independent Specialty see kind as call basis of within the bit -- still volume, just growth if out near to [indiscernible] And we and We'd still the at margin really points. come to be. some look we place from least love this are from -- lot higher accelerates. so So margin great are improvement XXX a at our incremental be to there.

helpful, hopefully, So that's Nigel.

Nigel Coe

restructuring I want Michael. It into $X.XX, $XX to -- Yes. And one investments. double is, tick that million I think pretax $XX to million just it's of

Just where terms given segment, you help impacts portfolio? across disclose by any that see you in restructuring of the heaviest don't the

Michael Larsen

the out level every improvement segment we margin release of when of -- back that call for Nigel. able that first these schedule get say of the it see detail, rather Suffice that lays report into to it I'd in half. be restructuring. the the rather in into opportunity the QX, one to of for segments. further out there's kind I'd of got that get you'll terms And in specifics by We'll not press not we've

of just that is XXXX. that -- headwind that a out be is rate is $X.XX half restructuring to year-over-year restructuring. and for about called clear, per to And Now first basis $X.XX share, was to is on EPS going other and of we half from XX% tax the planned the half restructuring the tax the of

to just little calling a will of we're start it go be through terms of the headline from might we help headwinds the a standpoint, the of we'll everybody the make those challenging we of But year kind on -- So year. unfold. -- want bit modeling was to numbers. out as a And kind in sure how clear the year nonoperational

Operator

Wells is Your the of from line next with Joe Fargo. question O'Dea

Joseph O'Dea

your about encouraging. to an inevitable advantage of comment recovery is Michael, take position your

end looking the you you're it's volume Just kind what these perspective but see end volumes markets of curious, or cycles, earliest? whether better, depressed think you're in of any are? think terms at, segment, get And to going and of kind as standpoint a you and market look do and markets some whether from region at things it's of how about where

Michael Larsen

ball help I I there. could I my think than wish you crystal yours. not I mean Joe, is Yes, any better

in advantage seeing years, think if cycle electronics that pretty was I I so look been X some think challenged. for we're at of the and certainly to of specific to has you that's reference taking one semi -- the recovery what

& kind for Instron said expect in growth for And that run. CapEx-driven encouraged flattish low X%, organic not positive typical down those you the last we're businesses. Test QX, Welding, kind some business digits QX right cycle. that's that That's the Measurement, of business, the in is the the over would full Typically, single in year. at I X but could X% X%, that think to of quarters. certainly where cycles the business and be now. of our same long the now X

where pretty only just things I a demand So fluid anecdotal you, of with these thing and the quickly here. quickly. we're know, give things This thoughts environment more on are pretty operating But as things change you -- can oriented. are go is change dynamic kind pretty just from short-cycle here. at We,

So then to come, with ourselves really long-term these on our focus recoveries spot we great position and a we're is to leveraging position sure these do and new invest make financial above-market cycles, grow these to for do going share products. to so. And businesses our continue how gain be through compete organic in when growth in we

talking that the we're really that's So about. focus

Joseph O'Dea

you kind answer, can a and long an headline that what uncertainty, but to living get pricing sure where of And would environment pricing response not how the in and you one-size-fits-all tariffs color. to be? on you in you how you the that's approach then and could it whiplash, in, the pricing anticipate that of kind can appreciate takes And tariffs is manage I just such have I'm how implement through system? how question quickly

Christopher O'Herlihy

Yes.

It's close made have and quicker divisions because given that decisions assure and pricing. and But means are are the fact that the more So then we can of our the that than different react around answer I nimbleness one-size-fits-all decentralized XX read nature customers, is very opportunity not you Joe, correct. more. we company, to of really what our given obviously to profiles XX a circumstances kind you're

the there's a for implement in of There's with the on that pricing. profile the approvals to whole the close are division ground, opportunity lot needed sees. to to not relative It's lag reason. that So us done circumstantial division, customer not that huge a the

Operator

Your next question is with Bank America. from of the line of Obin Andrew

Andrew Obin

Just a industrial short-cycle on names. follow-up

So TM&E just and Welding.

we're this possible think And not digits more to how growth sort just PMI is of modeling once if recovery? high cyclical over robust confirm, as organic year? we confirm should can single grow? any just of in fast So a businesses again, these sustainably XX, structurally, And to ramp

Michael Larsen

any markets, to Measurement. & Test incentive uncommon recovery to like of you take impossible But to modeling think, not see say, not our economists on question. think just we for are us businesses. Welding in the things where even mean, kind mid as these high maybe this, answer cycle out that quarterly are of given know, we as every we're digits. -- you to here, of I recovery, have and to there's And rates it's is of growth to a not will no nature try including different. Andrew, single go, forecast we'd so the that short it's I end opportunities. Historically I that of modeled of like coming demand, full -- in indeed advantage we If -- happens, levels cycles the current based growth we

sorry, I'm you. So I help can't

Andrew Obin

answer. No, great decline right, X% no, And Equipment, in X% quarter, plus quarter, X% guidance Food growth third a fourth the that's growth. in for on organic to versus solid just

the things Are quarter? from pressure So why seeing decelerate fourth you would anywhere?

Christopher O'Herlihy

No, over we're run seeing fourth the quarter. again sequential time, not pressure. basically on It's not rates based just

very are here. not in Food encouraged at about continued going would recovery levels service, seen We I this back generally, pre-pandemic still say. We've

America of business, are Equipment. Equipment, Food China refresh, like major fertile on captive environment a continued areas geographically. real continues Food the savings. We the only around then as to I institutions, manufacturer I and in it's very in Latin a Just water things see to earlier, be It differentiator market a for of we are innovation end said service to and kind But strength view geographically, and the energy that's like be think solid expected and us.

solid the expect XXXX. of a We the sold XXXX back on

Michael Larsen

this to that a I'd now say investments given we'll really do share the they service we Andrew, that further how see X year. X margin But to at improvement, is good pass and the So performing we'll we team the okay? level that talked your on runs And business, business optimism the about.

how in good so really feeling XXXX going And we're about positioned into we're Food Equipment.

Erin Linnihan

you, time thank for And everyone, your today. Great.

Operator

joining. today's for call. This Thank concludes you

lines. your disconnect now may You

Illinois Tool Works (ITW) 5 Feb 252024 Q4 Earnings call transcript