ITW Raises 2026 EPS Outlook as Q3 Organic Revenue Grows 4%

ITW raised and narrowed its full-year 2026 GAAP earnings outlook after third-quarter organic revenue increased 4%, led by sharp growth in Test & Measurement/Electronics and solid gains in Welding and Polymers & Fluids. The company now expects GAAP earnings per share of $11.45 to $11.55, lifting the midpoint by $0.05 to $11.50, which would represent 10% year-over-year growth.

Third-quarter revenue rose 4% to $4.24 billion from $4.06 billion a year earlier, while GAAP EPS increased 7% to $3.00 from $2.81. Operating income reached a quarterly record of $1.18 billion, up 6%, and operating margin expanded 40 basis points to 27.8%.

ITW said enterprise initiatives added 130 basis points to the quarterly margin, while price/cost was favorable on both an income and margin basis. After-tax return on invested capital, a non-GAAP measure, increased 50 basis points to 30.3%.

Free cash flow equaled 100% of net income during the quarter. The company had repurchased $1.3 billion of shares through the first nine months of the year and increased its dividend by 7%, marking its 63rd consecutive annual increase.

Test and electronics businesses lead growth

Test & Measurement/Electronics delivered the strongest segment performance. Revenue increased 17% to $819 million, with organic growth of 16%. Test & Measurement organic revenue rose 8%, while Electronics advanced 31%. The segment’s operating margin expanded 330 basis points to 28.7% from 25.4%.

Welding revenue climbed 7% to $513 million, with organic growth also at 7%. Excluding the impact of a tornado, organic growth was 15%. Equipment revenue rose 5%, consumables increased 10%, and North American sales grew 8%. Operating margin widened 370 basis points to 36.3%.

Polymers & Fluids posted an 8% increase in revenue to $477 million. Organic growth was 8%, including gains of 12% in Polymers, 9% in Fluids and 6% in Automotive Aftermarket. Operating margin improved 280 basis points to 31.3%.

Food Equipment revenue edged 1% higher to $698 million, matching its organic growth rate. Service revenue rose 5%, offsetting a 2% decline in equipment. International organic revenue increased 5%, while North America declined 3%. The segment’s operating margin rose 60 basis points to 29.8%.

Automotive and other segments remain under pressure

Automotive OEM revenue declined 2% to $814 million, and organic revenue also fell 2%. Organic sales decreased 1% in North America, 7% in Europe and 1% in China. The segment’s operating margin contracted 170 basis points to 20.1%.

Construction Products revenue was approximately flat at $472 million, while organic revenue declined 1%. North America was roughly unchanged, Europe decreased 2%, and Australia and New Zealand grew 1%. Operating margin fell 170 basis points to 29.9%.

Specialty Products revenue decreased 1% to $447 million, with organic revenue also down 1%. North American sales rose 3%, but international revenue declined 8%. Operating margin narrowed 90 basis points to 31.4%.

Full-year outlook points to stronger fourth-quarter organic growth

For 2026, ITW expects revenue of $16.8 billion to $16.9 billion, representing total growth of 4.5% to 5.5% and organic growth of 3% to 4%. The forecast implies organic growth of more than 5% in the fourth quarter, according to the presentation.

Management expects full-year operating margin of 26.5% to 27.5%, including a contribution of more than 100 basis points from enterprise initiatives. Price/cost is expected to remain favorable on an income basis and neutral to margin.

ITW projects a contribution of approximately 3% or more from Customer-Back Innovation in 2026, compared with 2.4% in 2025, reflecting what the company described as a meaningful increase in revenue from new products. Management also pointed to stronger capital-expenditure demand momentum.

The company expects free cash flow conversion of approximately 100% of net income, after-tax return on invested capital above 30%, and about $1.5 billion of share repurchases for the full year. Free cash flow conversion and return on invested capital are non-GAAP measures.

The outlook remains subject to risks including supply-chain conditions, inflation and raw-material costs, tariffs, pricing actions, interest and exchange rates, and changes in end-market economic or regulatory conditions. ITW also cautioned that the timing and benefits of enterprise initiatives, new-product contributions, margin performance and cash generation could differ from its current expectations.