Quick Verdict
Illinois Tool Works reported EPS of $3.00 and revenue of $4.24 billion, beating earnings estimates but narrowly missing sales expectations. Record operating profit supported higher annual guidance. Shares initially fell about 3%, then recovered to close down 0.10%, reflecting a mixed response to stronger profitability and uneven demand.
About Illinois Tool Works Inc.
Illinois Tool Works Inc. (NYSE: ITW) is a diversified industrial manufacturer founded in 1912 and headquartered in Glenview, Illinois. The company generated approximately $16 billion in 2025 revenue and employs about 43,000 people worldwide. Its seven operating segments serve automotive manufacturers, commercial kitchens, electronics producers, welding customers, construction markets, and other industrial applications. ITW operates through a decentralized business model that emphasizes specialized products, customer relationships, and entrepreneurial decision-making. Its strategy combines operational efficiency with “Customer-Back Innovation,” an approach focused on developing products around customers’ needs.
At the October 27, 2026 close, ITW had a market capitalization of approximately $78.6 billion. Earnings-day market data indicated a price-to-earnings ratio near 24.9 and a dividend yield around 2.49%. The company increased its annualized dividend to $6.88 per share during the quarter, marking its 63rd consecutive year of dividend increases. These figures provide context for assessing its earnings growth, valuation, and shareholder returns.
Top Financial Highlights
- Total revenue: $4.236 billion, up 4.4% from $4.059 billion a year earlier.
- Net income: $855 million, compared with $821 million in Q3 2025.
- Diluted GAAP EPS: $3.00, up 6.8% from $2.81.
- Gross margin: approximately 45.1%, calculated from revenue of $4.236 billion less cost of revenue of $2.326 billion.
- Operating income and margin: record operating income of $1.177 billion; operating margin expanded 40 basis points to 27.8%.
- Organic growth: 3.8% overall, including 6.0% growth in North America. Management estimated approximately 5% companywide organic growth excluding tornado disruption.
- Operating cash flow: $953 million; free cash flow totaled $851 million, approximately 100% of net income on the company’s rounded presentation.
- Test & Measurement and Electronics revenue: $819 million, up 17.3%, with a 28.7% operating margin.
- Automotive OEM revenue: $814 million, down 1.8%, with a 20.1% operating margin.
- Food Equipment revenue: $698 million, up 0.7%, with a 29.8% operating margin.
- Cash on hand: $809 million in cash and equivalents at September 30, 2026, versus $851 million at December 31, 2025.
- Fourth-quarter outlook: management expects revenue to rise 1%–2% sequentially, with implied organic growth above 5% year over year and operating margin in the mid-to-high 27% range. These are earnings-call expectations rather than a separately published quarterly EPS range.
- Full-year guidance: GAAP EPS narrowed to $11.45–$11.55, raising the midpoint by $0.05; revenue growth guidance increased to 4.5%–5.5%, while organic growth guidance remained 3%–4%.
- Capital returns: ITW repurchased $187 million of shares during the quarter and increased its annualized dividend by 7% to $6.88 per share.
- Weather disruption: tornado damage to two Welding facilities reduced quarterly revenue by an estimated $40 million; business-interruption insurance largely offset the associated operating-income loss.
Beat or Miss?
ITW delivered a mixed quarter relative to Wall Street expectations: earnings exceeded consensus, but revenue fell slightly short. Analyst expectations were approximately $2.97 per share and $4.26 billion in revenue
| Metric | Reported | Difference/Analysis |
| Diluted GAAP EPS | $3.00 | Beat the $2.97 consensus by $0.03, approximately 1%. |
| Revenue | $4.236 billion | Missed the approximately $4.26 billion consensus by about $24 million, or 0.6%; the difference is approximate because consensus is rounded. |
| Net income | $855 million | Consensus estimate: N/A in the reviewed coverage; increased from $821 million a year earlier. |
| Operating margin | 27.80% | Consensus estimate: N/A; expanded 40 basis points year over year. |
| Full-year GAAP EPS guidance | $11.45–$11.55 | Midpoint increased to $11.50 from the previous $11.45 midpoint. |
The key distinction is that ITW’s profitability improved faster than sales. Operating income increased 5.9%, supported by enterprise initiatives and favorable price-cost performance, despite the tornado-related revenue loss. However, business-interruption insurance also supported Welding profitability, so that segment’s unusually high quarterly margin should not be treated as a normal run rate.
What Leadership Is Saying
Christopher A. O’Herlihy, president and CEO, linked the quarter’s performance to innovation and execution of ITW’s longer-term strategy:
“As we continue to advance our enterprise strategy priorities, including our goal of 3 percent-plus Customer-Back Innovation yield, we are positioning ITW to deliver consistent, above-market organic growth while further expanding profitability and margins.”
CFO Michael Larsen highlighted the contribution of internal operating improvements during the earnings call:
“Operating margin expanded by 40 basis points year-over-year to 27.8%, with another solid 130 basis points contribution from enterprise initiatives.”
Together, these comments identify management’s two central priorities: generating more growth through customer-focused product development and converting that growth into higher margins through operating discipline. The 130-basis-point contribution from enterprise initiatives exceeded the net 40-basis-point margin improvement because other factors offset part of the benefit.
Historical Performance
Illinois Tool Works: Q3 2026 vs. Q3 2025
| Category | Q3 2026 | Q3 2025 | Change (%) |
| Revenue | $4,236 million | $4,059 million | 4.40% |
| Net income | $855 million | $821 million | 4.10% |
| Total operating costs and expenses¹ | $3,059 million | $2,947 million | 3.80% |
| Operating income | $1,177 million | $1,112 million | 5.90% |
| Diluted GAAP EPS | $3.00 | $2.81 | 6.80% |
Operating costs grew more slowly than revenue, helping ITW expand its operating margin. EPS also increased faster than net income as average diluted shares declined to 285.3 million from 291.7 million. Meanwhile, the effective tax rate rose to 24.4% from 21.8%, tempering the increase in net earnings.
Competitor comparison: Dover Corporation, Q3 2026 vs. Q3 2025
Dover (NYSE: DOV) provides a diversified industrial peer comparison. It reported results on October 22, 2026, for the same September quarter period. The following table uses GAAP figures, including total net earnings rather than adjusted earnings.
| Category | Q3 2026 | Q3 2025 | Change (%) |
| Revenue | $2,233.839 million | $2,077.841 million | 7.50% |
| Net income | $333.331 million | $301.996 million | 10.40% |
| Total operating costs and expenses² | $1,814.651 million | $1,700.688 million | 6.70% |
| Operating income | $419.188 million | $377.153 million | 11.10% |
Includes cost of goods and services plus selling, general, and administrative expenses. Changes are calculated from Dover’s reported figures and rounded.
Dover’s revenue and net income grew faster than ITW’s during the quarter. ITW nevertheless reported the higher operating margin: 27.8%, versus approximately 18.8% for Dover, calculated from consolidated operating earnings divided by revenue. These comparisons describe the quarter’s results, not a like-for-like ranking of business quality, because the companies have different product portfolios and cost structures.
How the Market Reacted?
ITW shares initially fell approximately 3% to $267.84 following the announcement, according to contemporaneous earnings coverage. Later coverage showed the stock nearly unchanged in early trading, and two market-data sources recorded an October 27 close of $275.93, down 0.10%. Yahoo Finance’s 4:10 p.m. EDT after-hours snapshot showed no further movement. The muted closing reaction was consistent with a report that combined an EPS beat, higher guidance, and record operating profit with a modest revenue miss.
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