stockrowWhat it does
Illinois Tool Works (ITW) is a global manufacturer of industrial products and equipment. Founded in 1912, it is headquartered in Glenview and led by President and Chief Executive Officer Christopher A. O’Herlihy. ITW has 88 divisions in 49 countries and employed 43,000 people at December 31, 2025.
The company sells specialized products rather than a single integrated system. Its Automotive OEM businesses make components, fasteners and assemblies for vehicle manufacturers and their suppliers. Food Equipment supplies commercial kitchens and food-service operators with cooking, refrigeration, warewashing, food-processing and ventilation equipment, alongside service, maintenance and repair.
Test & Measurement and Electronics sells equipment, consumables and software used to test materials and structures and to make electronic assemblies and microelectronics. Welding provides arc-welding equipment, consumables and accessories. Polymers & Fluids makes adhesives, sealants, lubricants, cutting fluids and automotive-aftermarket products. Construction Products supplies fastening systems, tools, anchors and related software. Specialty Products makes packaging, coding and marking equipment and consumables, appliance components, airport ground-support equipment and medical-device components.
Its electronics assembly businesses serve printed-circuit-board manufacturers, while semiconductor-related businesses serve chip manufacturers.
How it makes money
ITW organizes its operations into seven segments: Automotive OEM, Food Equipment, Test & Measurement and Electronics, Welding, Polymers & Fluids, Construction Products and Specialty Products. It earns revenue by selling equipment, components, tools, consumables, software and related services across these businesses. Many of the offerings are designed for particular industrial applications, such as electronic assembly, welding, fastening, commercial food preparation, adhesives and packaging.
The company primarily distributes products directly to industrial manufacturers and through independent distributors. Food Equipment also generates service, maintenance and repair revenue. Welding sells both equipment and metal arc welding consumables; Test & Measurement and Electronics sells equipment, consumables and software; and Specialty Products includes equipment paired with consumables. These categories can create repeat purchasing where customers use consumables, require maintenance, or replace and add equipment.
ITW applies its 80/20 Front-to-Back process in every business. The process uses data-driven insights to focus on larger opportunities and remove costs, complexity and less-profitable activity. Product-line simplification can reduce revenue in the short term while lowering overhead costs and improving operating margin.
Third-quarter 2026 total revenue grew 4.4%, including 3.8% organic growth, 0.3% from foreign-currency translation and 0.3% from an acquisition. Free cash flow was $851 million in the quarter, or 100% of net income.
Customers and how it sells
ITW serves a broad set of industrial and commercial customer groups. Automotive OEM primarily sells to automotive original-equipment manufacturers and tiers. Food Equipment serves food service, food retail and institutional or restaurant markets. Test & Measurement and Electronics serves electronics, general industrial, automotive, energy, industrial-capital-goods and consumer-durables markets. Welding serves fabrication, shipbuilding, construction, energy, maintenance, repair and operations, industrial capital goods and automotive markets.
Construction Products serves residential construction, renovation and remodeling, commercial construction and retail. Specialty Products reaches food and beverage, consumer durables, airlines, general industrial, industrial capital goods, printing and publishing markets. Its businesses primarily sell direct to industrial manufacturers and through independent distributors.
ITW operates in 49 countries, and over 50% of net sales come from customers outside the United States. North America was the company’s largest region and grew 6% organically in the third quarter of 2026; Asia Pacific grew 3%, China declined 2%, and Europe was flat. North America represents 85% of the Welding segment. In Construction Products, commercial construction represents about 15% of the North American business.
Suppliers and costs
ITW uses steel, resins and chemicals as its primary raw materials. These materials are available from numerous commercial sources. The company states that material and energy availability has not caused significant business interruptions or other major problems, and it does not identify a sole-source supplier.
Its cost structure includes raw materials, employee-related costs, overhead, logistics, freight and electronic components. The company’s strategic-sourcing initiative has delivered an average one percent reduction in spend each year since 2013. Its 80/20 process and product-line simplification seek to remove complexity, overhead costs and less-profitable activity.
Raw-material inflation included resin, chemicals, steel and electronic components, in the four to five percent range. Price-cost was modestly favorable in the third quarter, but Automotive OEM operating margin was down 170 basis points, primarily due to resin inflation and a price-cost timing lag.
- Revenue$16.0B
- Cost of revenue−$9.0B
- Selling, general and administrative−$2.8B
- Other operating costs−$80.0M
- Operating income$4.2B
Competitive position
ITW competes in fragmented markets across product lines, end markets and geographies. Its competitors include regional and specialized companies, large U.S. and non-U.S. companies, and divisions of larger companies. Each segment generally has several principal competitors and numerous smaller competitors. The Welding segment competes globally with Lincoln Electric Holdings, Inc. and ESAB Corporation.
ITW differentiates its businesses through product innovation, product quality, brand preference, service delivery and, in most segments, technical capability. The company identifies the ITW Business Model and decentralized structure as primary competitive advantages because they focus decision-making on local end markets and customers. It also identifies its global footprint as a competitive advantage in many markets, especially Automotive OEM.
ITW owns approximately 4,200 unexpired U.S. patents and 10,400 unexpired foreign patents, with further applications pending. It also sells products and services under owned or licensed trademarks including Deltar, Shakeproof, Hobart, Instron, MTS, Miller, Rain-X, Permatex, Paslode and Hi-Cone. The company states that expiry of any single patent would not materially affect operations or financial position.
Our reading: The decentralized operating model is a meaningful moat source because it combines local customer focus with a common operating process across 88 divisions. [item1]
Our reading: Patents, brands, service and technical capability support differentiation, but the company’s statement that no one patent is material limits reliance on any individual intellectual-property asset. [item1]
| Competitor | Where they compete | Threat (our reading) |
|---|---|---|
| Lincoln Electric Holdings, Inc. | global welding equipment and consumables | Medium |
| ESAB Corporation | global welding equipment and consumables | Medium |
Growth opportunities
ITW’s growth plan centers on organic growth, customer-back innovation, share gains and underlying growth in its end markets. Its customer-back innovation approach uses insights from the 80/20 process to identify customer needs and develop solutions for priority customers and markets. The company intends customer-back innovation, together with market growth and share gains, to support organic growth through the cycle.
Customer-backed innovation had contributed more than 3% to revenue growth so far in 2026, compared with 2.4% in 2025, and the company projects more than 3% for the full year. The long-term performance framework is 4% or higher organic growth and 30% operating margins by 2030. The company also routinely evaluates portfolio refinements and selective acquisitions to supplement long-term growth potential.
Current demand drivers include semiconductor, electronic assembly, industrial, infrastructure, energy, aerospace, defense, biopharma and data-center construction markets. Test & Measurement and Electronics delivered 16% organic growth in the third quarter, led by a 31% increase in electronics, while Welding grew 7%, or 15% excluding the tornado event. Polymers & Fluids grew 8%, supported by customer-backed innovation and market-share gains.
Welding order growth was running ahead of revenue, and the company expects Welding to return to strong growth in the fourth quarter after the tornado disruption. The company expects full-year 2026 organic growth of 3% to 4%, implying 5% or more in the fourth quarter.
- $14.5BFY2021
- $15.9BFY2022
- $16.1BFY2023
- $15.9BFY2024
- $16.0BFY2025
Structural risks
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Global economic and operating exposure: Over 50% of net sales are generated outside the United States, exposing ITW to currency movements, trade restrictions, tariffs, supply-chain disruption, political instability, conflicting regulations and challenges of managing multinational operations.
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Enterprise-strategy execution: The benefits of the enterprise strategy may not develop as expected, and the company may not meet its long-term financial-performance targets.
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Raw-material inflation and pricing timing: Resin, chemicals, steel and electronic components can raise input costs. Price increases may lag cost inflation, as occurred in Automotive OEM during the third quarter of 2026.
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Cyclical end-market demand: Construction Products and Automotive OEM are the company’s most interest-rate-sensitive businesses. Food Equipment institutional demand has also been affected by lower funding levels in areas including K-through-12.
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Acquisition risk: Acquired businesses could negatively affect profitability and returns.
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Regulatory and tax exposure: New or amended environmental, trade, labor, consumer-protection, tax, anti-bribery or competition requirements could increase restrictions and compliance costs or negatively affect operations and competitive position.
Bottom line
Our reading
Our reading: ITW is a diversified, short-cycle industrial manufacturer whose business spans equipment, components, consumables, software and service across seven segments and 49 countries. [item1][call_qa]
Our reading: Its operating model rests on decentralized divisions, the 80/20 process, customer-back innovation, brands and technical capability; this is balanced against exposure to industrial cycles, international operations and input-cost timing. [item1][item1a][call_prepared]
Our reading: Recent momentum in test and measurement, electronics, welding, and polymers and fluids contrasts with interest-rate-sensitive construction and automotive markets and softer institutional food-equipment demand. [call_prepared][call_qa]