Illinois Tool Works Inc.

Second-quarter revenue increased 6.1%, driven by 4.5% organic growth, 1.4% foreign-currency translation, and 0.2% from an acquisition. GAAP EPS was $2.84, up 10%, operating margin was 26.7% (up 40 basis points), and operating income was $1.15 billion, up 7.4%. Free cash flow rose 41%, with a 77% conversion rate. For full-year 2026, ITW raised organic growth guidance to 3% to 4% from 1% to 3%, raised GAAP EPS guidance by $0.15 to $11.35 to $11.55, kept operating margin guidance at 26.5% to 27.5%, kept the tax rate at 23% to 24%, expects free cash flow conversion above 100% of net income, and plans about $1.5 billion of share repurchases. Management said the updated guidance assumes current demand, typical seasonality, and prevailing FX, and it does not include any material recovery from potential tariff refunds.

Chris O'Herlihy framed the quarter as evidence that ITW's strategy is working, pointing to strong execution, rising CBI contribution, and broad demand acceleration in CapEx-related businesses. He said the company is on track toward its 2030 goals and emphasized that all seven segments are expected to grow organically and expand margins in 2026. His tone was confident and constructive, with repeated comments that the growth looks sustainable and that order activity is strengthening across several end markets.

Michael Larsen highlighted the mechanics behind the quarter: revenue up 6.1%, organic growth of 4.5%, and operating margin of 26.7% with 120 basis points of contribution from enterprise initiatives. He said price increases more than offset higher raw material costs in dollar terms, but timing lags between inflation and price actions temporarily reduced margins by 40 basis points. He also noted free cash flow was up 41%, conversion was 77%, and ITW opportunistically bought back $750 million of stock in the quarter at an average price of $255 per share, with full-year repurchases expected to be about $1.5 billion.

Analysts focused on whether the strong CapEx-related growth is durable, and management said order activity in Welding and Test & Measurement/Electronics is ahead of revenue and supports confidence in the second half. Questions on CBI drew the answer that it is measured as incremental revenue from products introduced in the last three years, net of cannibalization, and it is part of compensation; management said the 3% first-half contribution looks sustainable and should rise across segments. Other questions centered on margins, inflation, and 2027, and management said current margin pressure is mostly a temporary price/cost lag, with incrementals expected to normalize back toward 40% to 45% in a more normal environment.