ITW
Illinois Tool Works
Hybrid Industrial
★ Quality 74/100Price today
$270.12
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What this business is made of
The business
ITW designs custom parts that embed into the customer's production line.
Illinois Tool Works manufactures industrial components and equipment across seven segments: automotive, food, welding, packaging, test/measurement, construction, and specialty. It sells consumable and capital products to global manufacturers, with $16.0B in sales and gross margins of 53%. It designs 80% of its catalog for specific customers, which gives it pricing power.
The 80/20 model and decentralization into ~80 autonomous units let it run operating margins near 25%, rare for industrials. Its products are integrated into the customer's production lines, so switching suppliers means redesigning processes. It's not a monopoly, but the exit friction is real.
Revenue history
From $14.5B to $16.0B in 4 years. The business grows steadily.
Where each $100 of sales goes
Revenue $16.0B · FY2025
Of every $100 in sales, $81 goes to costs and operations; $19 is left as net profit (19% margin).
Catalysts and risks
Aggressive buybacks: ~$1.5B+ annually reducing the float and lifting FCF per share.
Operating margin expansion toward 27-28% via enterprise initiatives by 2026.
Organic growth in Test & Measurement and Food Equipment recovering after 2024.
Revenue CAGR of 3% — this isn't a growth machine, it's an efficiency machine.
Cyclical exposure to auto and construction; a global recession hits volumes directly.
$7.7B in debt against $0.9B in cash leaves little room if the cycle turns.
Charlie's note
“A well-oiled capital machine that compresses costs better than almost anyone. The problem is paying 21x for a business that grows at 3% — the quality is already in the price, and the patient investor waits for a better entry.”
Analysis · June 2026
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