During today's call we will discuss ITW's second quarter financial results and provide an update on our outlook for full year 2025. As you saw in our press release this morning, the ITW team outpaced underlying end market growth and delivered solid financial performance in the second quarter. Total revenue increased 1% as foreign currency translation increased revenue by 1% while product line simplification or PLS accounted for a 1% reduction. We achieved GAAP EPS of $2.58, operating income of $1.1 billion, an operating margin of 26.3% which are all second quarter records.
I will now turn the call over to Michael to discuss our second quarter performance in more detail as well as our updated full year guidance. Our top line saw a 1% increase in total revenue, driven in part by a 1% positive impact from foreign currency translation. Our organic growth rate was essentially flat, marking an improvement of over a percentage point from Q1 geographically. While North America posted a 2% organic revenue decline and Europe was down 3%, Asia Pacific stood out with a 9% increase with impressive growth of 15%.
In China, we experienced encouraging sequential revenue growth of 6% from Q1, along with some positive signs in end markets such as semiconductors, electronics, welding, specialty products, equipment and an improved outlook for autobuilds. Our enterprise initiatives were particularly effective this quarter, contributing 130 basis points to the operating margin of 26.3%. Although our decisive pricing actions more than cover tariff costs and positively impacted EPS in Q2, the overall price cost dynamic was modestly dilutive to our margin. Finally, we generated $449 million in free cash flow representing a 59% conversion rate.
| Metric | Period | Current guidance |
|---|---|---|
| Full year 2025 guidance | FY2025 | raised (Raised) |
| FX impact on EPS | FY2025 | modest favorability at current rates (Improved) |
| Relevant Automotive markets | FY2025 | down low single digits (Improved) |
| Implied organic growth | 2H 2025 | 2%-3% |
| Implied operating margin | 2H 2025 | about 27% |
| CBI yield | FY2025 | 2.3%-2.5% (On track) |
| Restructuring spend (2H) | 2H 2025 | about $20 million (~$0.05/share), flat YoY |
| Strategic PLS headwind | FY2025 | about 100 bps (unchanged) (Unchanged) |
| Share buybacks | FY2025 | about $1.5 billion (~2% of shares) |
| Metric | YoY | Note |
|---|---|---|
| Total revenue | +1% | Foreign currency translation added 1% while product line simplification (PLS) reduced revenue by 1%; organic growth was essentially flat. |
| Automotive OEM revenue | +4% (+2% organic) | China grew 22% on EV share gains and content-per-vehicle growth; North America down 7% and Europe up 1%; PLS reduced revenue by over 1%. |
| Food equipment revenue | +2% (+1% organic) | North America grew 5% with strength in institutional end markets; international was down 5%; service grew 3% while equipment was flat. |
| Test and measurement and electronics revenue | +1% (-1% organic) | Capital equipment demand remained challenging; electronics grew 4% on double-digit semiconductor-related growth. |
| Welding revenue | +3% organic | Equipment up 4% on new products and consumables up 1%; international up 11%, driven by 28% China growth tied to energy-sector product launches. |
| Polymers and fluids revenue | -3% | Organic down 5% in polymers and 3% in fluids and automotive aftermarket, plus a 1 point PLS headwind. |
| Construction products revenue | -6% residential | Interest-rate-sensitive demand challenges; North America down 7%, Europe down 5%, Australia/New Zealand down 10%; margin still improved 140 bps to 30.8%. |
| Specialty products revenue | +1% (flat organic) | Tough 7% prior-year comparison; equipment sales rose 8% on packaging and aerospace strength; PLS over 1 point. |
| China revenue | +15% | Led by automotive, with solid double-digit growth in test and measurement, polymers and fluids, and welding, correlated to high new-product contribution. |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Customer-backed innovation (CBI) | — | Strong pipeline across all seven segments; on track for 2.3%-2.5% yield this year and 3%+ by 2030; cited as the main driver of above-market growth | Rising |
| Tariffs and price/cost | real concerns around tariffs | Pricing more than offset tariff costs on a dollar basis (EPS positive) but modestly margin dilutive; over 90% produce-what-they-sell mitigates direct impact | Steady |
| China growth and durability | — | 15% growth with margins matching North America/Western Europe; viewed as sustainable on differentiation, long customer partnerships, and local production | Rising |
| Sequential demand momentum | talk of slowdown | Encouraging positive momentum with order activity picking up in test and measurement and general industrial CapEx late in the quarter | Rising |
| Enterprise initiatives | — | Contributed 130 bps to operating margin (about 160 bps in construction), key driver of margin expansion despite soft volumes | Steady |
| M&A and capital allocation | — | Disciplined, selective approach seeking 4%+ growth targets; dividend toward high end of peer group; about $1.5 billion of buybacks; valuations make M&A challenging | Steady |