Illinois Tool Benefits From Business Strength Amid Headwinds

Illinois Tool Works Inc. ITW is witnessing solid momentum in the Specialty Products segment. The segment is being driven by strength in the ground support equipment, consumer packaging and specialty films businesses. Organic revenues from the segment inched up 0.3% in the second quarter of 2025.

Growth in the institutional, restaurant and food retail markets in North America, along with higher service revenues and strong demand in the European warewashing equipment market, has been aiding the Food Equipment segment’s performance. Organic revenues from the segment increased 1% in the second quarter. Also, growth in auto build rates and strength in the electric vehicles market in China, along with market penetration gains in Europe, have been aiding the Automotive OEM segment. Organic revenues from the segment increased 2% in the second quarter.

Illinois Tool’s enterprise initiatives, which focus on enhancing operational efficiency, optimizing the supply chain and building innovative solutions, are supporting its margin performance. Its enterprise initiatives contributed 130 basis points to the operating margin in the second quarter. The company expects these initiatives to contribute approximately 100 basis points to the operating margin in 2025.

ITW remains committed to rewarding its shareholders substantially through dividend payments and share buybacks. In the first six months of 2025, it used $880 million and $750 million in paying out dividends and repurchasing shares, respectively. Also, in 2024, it paid dividends worth $1.7 billion and bought back common stock for approximately $1.5 billion. In August 2025, the company hiked its dividend by 7% to $1.61 per share.

ITW Stock’s Price Performance

In the past month, the Zacks Rank #3 (Hold) company has gained 4.4% compared with the industry’s 2.5% growth.

However, weakness in the polymers and fluids businesses, owing to lower demand across North America and Europe, has been denting revenues at the Polymers & Fluids segment. Also, softness in automotive aftermarket businesses, due to lower demand in the North American body and tire repair businesses, remains concerning for the segment. The segment’s organic revenues declined 4% year over year in the second quarter.

Also, lower demand across all major end markets is weighing on the Construction Products segment, organic revenues from which declined 7% year over year in the second quarter.

The company's high debt profile also remains concerning. Exiting second-quarter 2025, its long-term debt balance was pegged at $7.7 billion, up 5.7% on a sequential basis. Its short-term debt totaled $1.2 billion. Considering its high debt level, the company’s cash and cash equivalents of $788 million do not look impressive.

Stocks to Consider

Some better-ranked stocks from the same space are discussed below.

Flowserve Corporation FLS currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

FLS delivered a trailing four-quarter average earnings surprise of 5.5%. In the past 60 days, the Zacks Consensus Estimate for Flowserve’s 2025 earnings has increased 5.6%.

Crane Company CR presently carries a Zacks Rank #2 (Buy). The company delivered a trailing four-quarter average earnings surprise of 7.5%.

In the past 60 days, the consensus estimate for CR’s 2025 earnings has increased 4%.

RBC Bearings Incorporated RBC presently carries a Zacks Rank of 2. RBC delivered a trailing four-quarter average earnings surprise of 3.8%.

In the past 60 days, the consensus estimate for RBC’s 2025 earnings has inched up 1.4%.

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This article originally published on Zacks Investment Research (zacks.com).

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