Manufacturing company Illinois Tool Works (NYSE: ITW) beat Wall Street’s revenue expectations in Q2 CY2025, but sales were flat year on year at $4.05 billion. Its GAAP profit of $2.58 per share was 0.9% above analysts’ consensus estimates.

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“The ITW team outpaced underlying end market growth and delivered solid financial performance in the second quarter, achieving EPS of $2.58, operating income of $1.1 billion, and operating margin of 26.3 percent, all second-quarter records. Our results are a direct outcome of the strength of the ITW Business Model, the quality of our diversified and resilient portfolio, and the unwavering dedication of our global ITW colleagues to serving our customers and executing our strategy with excellence,” said Christopher A. O’Herlihy, President and Chief Executive Officer.

Company Overview

Founded by Byron Smith, an investor who held over 100 patents, Illinois Tool Works (NYSE: ITW) manufactures engineered components and specialized equipment for numerous industries.

Revenue Growth

A company’s long-term performance is an indicator of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Regrettably, Illinois Tool Works’s sales grew at a sluggish 4.4% compounded annual growth rate over the last five years. This was below our standard for the industrials sector and is a poor baseline for our analysis.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Illinois Tool Works’s recent performance shows its demand has slowed as its revenue was flat over the last two years.

Illinois Tool Works also reports organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, Illinois Tool Works’s organic revenue was flat. Because this number aligns with its normal revenue growth, we can see the company’s core operations (not acquisitions and divestitures) drove most of its results.

This quarter, Illinois Tool Works’s $4.05 billion of revenue was flat year on year but beat Wall Street’s estimates by 0.9%.

Looking ahead, sell-side analysts expect revenue to grow 2.5% over the next 12 months. While this projection implies its newer products and services will spur better top-line performance, it is still below average for the sector.

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Operating Margin

Illinois Tool Works has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 24.8%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Analyzing the trend in its profitability, Illinois Tool Works’s operating margin rose by 1.2 percentage points over the last five years, as its sales growth gave it operating leverage.

In Q2, Illinois Tool Works generated an operating margin profit margin of 26.4%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Illinois Tool Works’s EPS grew at a solid 10.9% compounded annual growth rate over the last five years, higher than its 4.4% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into Illinois Tool Works’s quality of earnings can give us a better understanding of its performance. As we mentioned earlier, Illinois Tool Works’s operating margin was flat this quarter but expanded by 1.2 percentage points over the last five years. On top of that, its share count shrank by 7.7%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Illinois Tool Works, its two-year annual EPS growth of 6.2% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q2, Illinois Tool Works reported EPS at $2.58, up from $2.54 in the same quarter last year. This print was close to analysts’ estimates. Over the next 12 months, Wall Street expects Illinois Tool Works’s full-year EPS of $11.40 to shrink by 6.5%.

Key Takeaways from Illinois Tool Works’s Q2 Results

We enjoyed seeing Illinois Tool Works beat analysts’ organic revenue expectations this quarter. We were also glad its full-year EPS guidance slightly exceeded Wall Street’s estimates. Overall, we think this was a decent quarter with some key metrics above expectations. The stock remained flat at $259.50 immediately following the results.

Indeed, Illinois Tool Works had a rock-solid quarterly earnings result, but is this stock a good investment here? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.