ITW Achieves Strong First Quarter Performance Amid Uncertainty
ITW, a leading industrial technology company, has reported a solid start to the year with flat organic growth on an equal days basis in a steady demand environment. According to Chris O'Herlihy, President and CEO, this performance demonstrates ITW's ability to outperform in uncertain and volatile environments.
The company executed well in controlling the controllables, with enterprise initiatives contributing 120 basis points to operating margins of 24.8%. Additionally, GAAP EPS came in ahead of planned expectations at $2.38. Importantly, progress has been made on key strategic priorities, focusing on building above-market organic growth fueled by customer-backed innovation.
Chris O'Herlihy highlighted the unique advantages that ITW derives from its powerful business model, diversified portfolio, decentralized structure, and considerable financial strength. This, combined with a 90%-plus "produce where we sell" manufacturing strategy, positions ITW to better mitigate the impact of tariffs.
The company has implemented strategic adjustments and ongoing pricing actions to offset the cost impact of tariffs, which are projected to be EPS neutral or better by year-end. Despite uncertainties surrounding customer demand and tariffs, ITW remains committed to leveraging its financial strength to execute its long-term strategy.
Michael Larsen, Senior Vice President and CFO, provided more detail on the quarter's performance and guidance for 2025. He noted that organic revenue was down 1.6%, with a flat top line on an equal days basis. Foreign currency translation reduced revenue by 1.8%, while Product Line Simplification reduced revenue by 50 basis points in the quarter.
Despite these challenges, ITW's focus on executing well on controllable items paid off, as evidenced by enterprise initiatives contributing 120 basis points to operating margins and free cash flow of $496 million with a conversion rate of 71%. Operating margin was 24.8%, driven primarily by the nonrepeat of last year's 300 basis point LIFO inventory accounting benefit.
The company projects that margins will continue to improve sequentially throughout the year, supported by meaningful contributions from enterprise initiatives that are volume-independent. With a strong start to the year and commitment to executing its long-term strategy, ITW is well-positioned for continued success despite ongoing uncertainty.
