Q1 2026 Illinois Tool Works Inc Earnings Call

April 30, 2026

Cath: Good morning. My name is Cath, and I will be your conference operator today. At this time, I would like to welcome everyone to the ITW's Q1 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be question and answer session. If you would like to ask a question during this time, simply press star followed by the 1 on your telephone keypad. If you would like to withdraw your question, press star one again. For those participating in the Q&A, you will have the opportunity to ask 1 question, and if needed, 1 follow-up question. Thank you. Erin Linnihan, Vice President of Investor Relations, you may begin your conference.

Operator: Good morning. My name is Cath, and I will be your conference operator today. At this time, I would like to welcome everyone to the ITW's Q1 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be question and answer session. If you would like to ask a question during this time, simply press star followed by the 1 on your telephone keypad. If you would like to withdraw your question, press star one again.

Speaker #2: After the All lines have been placed on mute to prevent If you would like to If you would like to withdraw your question, press the star 1 again.

Speaker #2: For those participating in the Q&A, you will have the opportunity to ask one question. And if needed, one follow-up question. Thank you. Erin Linnihan, Vice President of Investor Relations, you may begin your conference.

Operator 1: For those participating in the Q&A, you will have the opportunity to ask 1 question, and if needed, 1 follow-up question. Thank you. Erin Linnihan, Vice President of Investor Relations, you may begin your conference.

Speaker #2: Thank you, Kath. Good morning. And welcome to ITW's first quarter 2026 conference call. I'm joined by our President and CEO, Christopher OHerlihy, and Senior Vice President and CFO, Michael Larsen.

Erin Linnihan: Thank you, Cath. Good morning, welcome to ITW's Q1 2026 Conference Call. I'm joined by our President and CEO, Christopher O'Herlihy, and Senior Vice President and CFO, Michael Larsen. During today's call, we will discuss ITW's Q1 2026 financial results and provide an update on our outlook for full year 2026. Slide 2 is a reminder that this presentation contains forward-looking statements. Please refer to the company's 2025 Form 10-K and subsequent reports filed with the SEC for more detail about important risks that could cause actual results to differ materially from our expectations. This presentation uses certain non-GAAP measures, a reconciliation of those measures to the most directly comparable GAAP measures is contained in the press release. Please turn to slide 3, it's now my pleasure to turn the call over to our President and CEO, Christopher O'Herlihy. Chris.

Speaker #2: During today's call, we will discuss ITW's first quarter 2026 financial results and provide an update on our outlook for full year 2026. Slide 2 is a reminder that this presentation contains forward-looking statements.

Speaker #2: Please refer to the company's 2025 Form 10-K and subsequent reports filed with the SEC for more detail about important risks that could cause actual results to differ materially from our expectations.

Speaker #2: This presentation uses certain non-GAAP measures and a reconciliation of those measures to the most

Speaker #1: The most directly comparable GAAP measures is contained in the press release Please turn to slide three . And it's now my pleasure to turn the call over to our president and CEO , Chris O'Hurley .

Speaker #1: Chris

Speaker #2: Thank you , Erin , and good morning , everyone . As you saw in our press release this morning , it delivered a solid start to the year with results that were in line with our expectations .

Christopher O'Herlihy: Thank you, Erin. Good morning, everyone. As you saw in our press release this morning, ITW delivered a solid start to the year with results that were in line with our expectations. In Q1, we continued to outperform our underlying end markets, delivering revenue growth of 5% and a 12% increase in GAAP EPS to $2.66. Through disciplined operational execution, we expanded operating margin by 60 basis points to 25.4%. We continued to capitalize on positive demand trends in our CapEx-related segments, with organic growth in Welding up 6% and Test & Measurement and Electronics up 5%. While our consumer-facing businesses contended with challenging end market dynamics, the ITW team executed at a high level on the profit drivers within our control.

Speaker #2: In the first quarter , we continued to outperform our underlying end markets , delivering revenue growth of 5% and a 12% increase in GAAP EPS to $2.66 through disciplined operational execution .

Speaker #2: We expanded operating margin by 60 basis points to 25.4% . This is the key driver of our ability to consistently deliver 4% plus high quality organic growth at the enterprise level As we look ahead and based on our solid Q1 results , we are raising our full year GAAP EPS guidance by $0.10 .

Christopher O'Herlihy: Our enterprise initiatives contributed 120 basis points to the bottom line, driving at that 60 basis point overall margin improvement. We were equally encouraged by our continued progress on ITW's organic growth agenda, specifically on customer-backed innovation, or CBI as we call it. We are positioning the company to consistently deliver 3%-plus CBI contribution to revenue by 2030. As we've noted before, this is the key driver of our ability to consistently deliver 4%-plus high-quality organic growth at the enterprise level. As we look ahead and based on our solid Q1 results, we are raising our full-year GAAP EPS guidance by $0.10. Our new guidance midpoint of $11.30 incorporates a slightly lower tax rate and represents 8% year-over-year growth. Our full-year organic growth projection of 1% to 3% remains unchanged, reflecting current demand levels adjusted for seasonality.

Speaker #2: Our new guidance midpoint of $11.30 , incorporates a slightly lower tax rate and represents 8% year over year growth . Our full year organic growth projection of 1 to 3% remains unchanged , reflecting current demand levels .

Speaker #2: Adjusted for seasonality for the full year, we expect operating margin expansion of approximately 100 basis points, powered by our enterprise initiatives. Notably, all seven segments are projected to deliver positive organic growth and margin expansion in 2026.

Christopher O'Herlihy: For the full year, we expect operating margin expansion of approximately 100 basis points, powered by our enterprise initiatives. Notably, all seven segments are projected to deliver positive organic growth and margin expansion in 2026. As we've said before, ITW's unique business model, resilient portfolio, and do what we say execution demonstrated daily by our colleagues worldwide ensure we are well-positioned to deliver robust financial performance in any environment and remain invested in our long-term strategy through any business cycle. As order activity continues to strengthen across several of our end markets, our production capacity, new product pipeline, and best-in-class customer-facing metrics position us to take market share and fully capitalize on these positive demand trends that we are now beginning to see. With that, I'll now turn the call over to Michael to provide more detail on the quarter and our guidance for 2026. Michael?

Speaker #2: As we've said before , it unique business model , resilient portfolio and do what we say execution demonstrated daily by our colleagues worldwide ensure we are well positioned to deliver robust financial performance in any environment and remain invested in our long term strategy through any business cycle .

Speaker #2: As order , activity continues to strengthen across several of our end markets , our production capacity , new product pipeline and best in class customer facing metrics position us to take market share and fully capitalize on these positive demand trends that we are now beginning to see .

Speaker #2: With that , I'll now turn the call over to Michael to provide more detail on the quarter and our guidance for 2026 . Michael ,

Speaker #3: Thank you , Chris , and good morning , everyone . In Q1 , the IT team delivered a solid operational and financial start to the year Starting with the top line revenue growth was 4.6% , driven by organic growth of 0.4% , a 3.9% contribution from foreign currency translation and 0.3% from an acquisition .

Michael Larsen: Thank you, Chris. Good morning, everyone. In Q1, the ITW team delivered a solid operational and financial start to the year. Starting with the top line, revenue growth was 4.6%, driven by organic growth of 0.4%, a 3.9% contribution from foreign currency translation, and 0.3% from an acquisition. As Chris said, we were particularly encouraged by positive demand trends and strong order activity in our CapEx and semi-related segments. The combination of our product line simplification, PLS, efforts and delayed sales to the Middle East reduced our organic growth rate by approximately 1 percentage point. For context, our annual sales to the Middle East represent approximately $100 million, which is less than 1% of ITW's total annual sales.

Speaker #3: As Chris said , we were particularly encouraged by positive demand trends and strong order activity in our CapEx and semi related segments . The combination of our product line simplification , PLS efforts and delayed sales to the Middle East reduced our organic growth rate by approximately one percentage point for context , our annual sales to the Middle East represent approximately $100 million , which is less than 1% of its total annual sales .

Speaker #3: On the bottom line , operating margin improved by 60 basis points to 25.4% , with enterprise initiatives contributing 120 basis points . Incremental margins were approximately 40% in the quarter , and we expect both margin and incremental margins to move higher as the year progresses Free cash flow grew 6% with a 69% conversion rate , reflecting typical first quarter seasonality .

Michael Larsen: On the bottom line, operating margin improved by 60 basis points to 25.4%, with enterprise initiatives contributing 120 basis points. Incremental margins were approximately 40% in the quarter. We expect both operating margin and incremental margins to move higher as the year progresses. Free cash flow grew 6% with a 69% conversion rate reflecting typical Q1 seasonality. We also repurchased $375 million of shares during the quarter. Overall, a solid start to the year with revenue growth of 5%, earnings growth of 12%, and some encouraging demand trends that bode well for the balance of the year. Please turn to slide 4 for a brief update on our enterprise initiatives.

Speaker #3: We also repurchased $375 million of shares during the quarter Overall , a solid start to the year with revenue growth of 5% . Earnings growth of 12% and some encouraging demand trends , that bode well for the balance of the year .

Speaker #3: Please turn to slide four for a brief update on our enterprise initiatives Since 2012 , our strong execution on the enterprise initiatives have been the most impactful driver of margin improvement at it The 120 basis points contribution this quarter from our strategic sourcing and 80/20 front to back activities was in line with our expectations , and we remain on track for a full year impact of approximately 100 basis points , independent of volume .

Michael Larsen: Since 2012, our strong execution on the enterprise initiatives have been the most impactful driver of margin improvement at ITW. The 120 basis points contribution this quarter from our strategic sourcing and 80/20 Front-to-Back activities was in line with our expectations. We remain on track for a full year impact of approximately 100 basis points independent of volume. Looking ahead, we expect these initiatives to continue to drive meaningful gains through 2030 as we track toward our 30% margin goal. Now let's move to the segment highlights, starting with Automotive OEM, where revenue increased 4%. While organic revenue declined 1%, we outperformed global automotive builds, which were down more than 3%. On a regional basis, North America was down 5%, while Europe was flat.

Speaker #3: Looking ahead , we expect these initiatives to continue to drive meaningful gains through 2030 as we track toward our 30% margin goal . Now let's move to the segment highlights , starting with automotive OEM , where revenue increased 4% , while organic revenue declined 1% .

Speaker #3: We outperformed global automotive builds , which were down more than 3% on a regional basis . North America was down 5% , while Europe was flat China declined 3% , but significantly outperformed automotive builds , which were down 10% .

Michael Larsen: China declined 3% but significantly outperformed automotive builds, which were down 10%. Builds in China are projected to meaningfully improve sequentially in Q2, including double-digit growth in EVs, where we are particularly well-positioned. At the segment level, we continue to expect our typical 200 to 300 basis points of outperformance versus builds that are now expected to be down approximately 2% for the full year. Operating margin improved by 170 basis points to 21%. Turning to slide 5, Food Equipment delivered revenue growth of 2%, with organic revenue down 3%. Strength in service, which grew 3%, partially offset a 6% decline in equipment. North America was down 5%.

Speaker #3: Builds in China are projected to meaningfully improve sequentially in the second quarter , including double digit growth in EVs , where we are particularly well positioned at the segment level , we continue to expect our typical 2 to 300 basis points of outperformance versus builds that are now expected to be down approximately 2% for the full year Operating margin improved by 170 basis points to 21% .

Speaker #3: Turning to slide five . Food equipment delivered revenue growth of 2% with organic revenue down 3% . Strength in service , which grew 3% , partially offset a 6% decline in equipment North America was down 5% .

Speaker #3: A slower start than expected under the institutional side , particularly in the education end market was partially offset by growth in restaurants including QSR , which was up double digits and service , which grew more than 4% .

Michael Larsen: A slower start than expected on the institutional side, particularly in the education end market, was partially offset by growth in restaurants, including QSR, which was up double digits, and service, which grew more than 4%. Encouragingly, since January, we have seen gradual improvement in institutional demand trends. At the Food Equipment segment level, we continue to expect positive organic growth and margin improvement for the full year. The international business was flat and is projected to deliver positive organic growth starting in Q2. Test & Measurement and Electronics had a standout quarter, with 10% revenue growth and 5% organic growth, the highest growth rate in 3 years, as the green shoots we talked about last quarter begin to look more like a sustainable recovery.

Speaker #3: Encouragingly , since January , we have seen gradual improvement in institutional demand trends and at the food equipment segment level , we continue to expect positive organic growth and margin improvement for the full year The international business was flat and is projected to deliver positive organic growth starting in Q2 Test and measurement and electronics had a standout quarter with 10% revenue growth and 5% organic growth , the highest growth rate in three years .

Speaker #3: As the green shoots , we talked about last quarter begin to look more like a sustainable recovery through this recent down . Our divisions stayed invested in their long term growth strategies , including capacity and new products and they're uniquely positioned to meet growing customer demand and fully capitalize on the growth opportunities in front of them As a result electronics grew 10% this quarter , and the semi related businesses , which represent about $500 million of annual revenues or about 15% of the segment , grew more than 15% .

Michael Larsen: Through this recent down cycle, our divisions stayed invested in their long-term growth strategies, including capacity and new products, and they are uniquely positioned to meet growing customer demand and fully capitalize on the growth opportunities in front of them. As a result, Electronics grew 10% this quarter, and the semi-related businesses, which represent about $500 million of annual revenues or about 15% of the segment, grew more than 15%. Looking ahead, market indicators like increasing fab utilization, encouraging customer signals, and re-response to new products, as well as strong order activity, all support the view that the positive demand trends that we're seeing in this segment today are sustainable in the near term. Moving on to slide 6, Welding delivered another strong top line performance as revenue grew 7% with organic growth of 6%.

Speaker #3: Looking ahead , market indicators like increasing fab utilization , encouraging customer signals , and response to new products , as well as strong order activity all support the view that the positive demand trends that we're seeing in this segment today are sustainable in the near term Moving on to slide six , welding delivered another strong top line performance as revenue grew 7% with organic growth of 6% .

Speaker #3: Equipment grew 8% with a strong contribution from new products North America was the primary growth engine , of 8% , with mid-single digit growth in filler metals .

Michael Larsen: Equipment grew 8% with a strong contribution from new products. North America was the primary growth engine of 8% with mid-single digit growth in filler metals. The growth was broad-based with mid to high single digit growth across our businesses, including in both industrial and commercial. International was down 6% due to a difficult comparison of +14% in the year ago quarter. Operating margin was best in class at 32.1%. Polymers & Fluids delivered 5% revenue growth and organic growth of 2%, driven by new products and robust market share gains, primarily in automotive aftermarket, which grew 3%. Polymers was flat against a tough comparison of +6%, and Fluids was also flat. Operating margin expanded 150 basis points to 28%. Turning to slide 7.

Speaker #3: The growth was broad based , with mid to high single digit growth across our businesses , including in both industrial and commercial International was down 6% due to a difficult comparison of plus 14% in the year ago quarter , operating margin was best in class at 32.1% .

Speaker #3: Polymers and fluids delivered 5% revenue growth and organic growth of 2% , driven by new products and robust market share gains , primarily in automotive , aftermarket , which grew 3% .

Speaker #3: Polymers was flat against a tough comparison of plus 6% , and fluids was also flat . Operating margin expanded 150 basis points to 28% .

Speaker #3: Turning to slide seven . In construction products , revenue was up 3% , and encouragingly , this quarter marked the best organic growth performance in four years Overall , organic growth declined 1% .

Michael Larsen: In Construction Products, revenue was up 3%, and encouragingly this quarter marked the best organic growth performance in 4 years. Overall, organic growth declined 1%. North America was flat as our residential and renovation business delivered positive organic growth of 1%. In this segment, we remain well-positioned for the inevitable housing recovery down the road. Europe was down 3% and Australia/New Zealand was down 2%. Specialty Products revenue was down 1%, with organic revenue down 5% due to the impact of PLS activities and delayed Middle East sales. Despite the top line pressure and with the margin tailwind from recent PLS activities, the segment expanded operating margin by 40 basis points to 31.3%. With that, let's turn to slide 8 for an update on our guidance.

Speaker #3: North America was flat as our residential and renovation business delivered positive organic growth of 1% . In this segment , we remain well positioned for the inevitable housing recovery down the road Europe was down 3% and Australia , New Zealand was down 2% .

Speaker #3: Specialty products revenue was down 1% with organic revenue down 5% due to the impact of PLS activities and delayed Middle East sales Despite the top line pressure .

Speaker #3: And with the margin tailwind from recent PLS activities . The segment expanded operating margin by 40 basis points to 31.3% , with that , let's turn to slide eight for an update on our guidance As we've said before , it is well positioned to deliver meaningful progress on both the top and bottom lines in 2026 .

Michael Larsen: As we've said before, ITW is well-positioned to deliver meaningful progress on both the top and bottom lines in 2026. On the top line, we are maintaining our total revenue growth projection of 2% to 4% and organic growth projection of 1% to 3%. Per our usual process, this is based on current levels of demand, adjusted for typical seasonality and prevailing foreign exchange rates. On the bottom line, we continue to expect operating margin to improve by approximately 100 basis points to a range of 26.5% to 27.5% as enterprise initiatives contribute approximately 100 basis points. We continue to expect that price costs will be modestly accretive to margins after factoring in recent tariff changes and all known material cost increases offset by corresponding pricing and supply chain actions.

Speaker #3: On the top line , we are maintaining our total revenue growth projection of 2 to 4% and organic growth projection of 1 to 3% per our usual process .

Speaker #3: This is based on current levels of demand adjusted for typical seasonality and prevailing foreign exchange rates On the bottom line , we continue to expect operating margin to improve by approximately 100 basis points to a range of 26.5 to 27.5% .

Speaker #3: As enterprise initiatives contribute approximately 100 basis points, we continue to expect that price costs will be modestly accretive to margins after factoring in recent tariff changes and all known material cost increases, offset by corresponding pricing and supply chain actions. Our projection for incremental margins in the mid to high 40s remains unchanged, incorporating our first quarter results and the lower effective tax rate projection for the year of 23 to 24%.

Michael Larsen: Our projection for incremental margins in the mid to high 40s remain unchanged. Incorporating our Q1 results and the lower effective tax rate projection for the year of 23% to 24%, we are raising our GAAP EPS guidance by $0.10 to a new range of $11.10 to $11.50, representing 8% growth at the $11.30 midpoint. In terms of cadence, we are projecting a 48, 52 EPS split between the H1 and H2 of the year, which is less back-end loaded than 2025 and our previous guidance. Finally, we expect free cash flow conversion to exceed 100% of net income. We are on track to repurchase approximately $1.5 billion of our shares in 2026.

Speaker #3: We are raising our GAAP EPS guidance by $0.10 to a new range of $11.10 to $11.50 , representing 8% growth at the $11.30 midpoint .

Speaker #3: In terms of cadence , we are projecting a 4852 EPS split between the first and second half of the year , which is less back end loaded than 2025 .

Speaker #3: And our previous guidance Finally , we expect free cash flow conversion to exceed 100% of net income , and we are on track to repurchase approximately 1.5 billion of our shares in 2026 .

Speaker #3: In summary , we're heading into the balance of the year with positive momentum on both the top and bottom line All seven segments are projecting positive organic growth and further improvement in their industry leading margins Overall , it is well positioned to deliver on our guidance , including solid , organic growth with best in class margins and returns And with that , I'll turn it back to you

Michael Larsen: In summary, we're heading into the balance of the year with positive momentum on both the top and bottom line. All seven segments are projecting positive organic growth and further improvement in their industry-leading margins. Overall, ITW is well-positioned to deliver on our guidance, including solid organic growth with best-in-class margins and returns. With that, Erin, I'll turn it back to you.

Speaker #1: Thank you Michael . Kath , will you please open the line and inform callers on how to get back into the queue

Erin Linnihan: Thank you, Michael. Cath, will you please open the line and inform callers on how to get back into the queue?

Speaker #4: Thank you . At this time , I would like to remind everyone to ask question press star . Then the number one on your telephone keypad .

Cath: Thank you. At this time, I would like to remind everyone to ask question, press star, then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Andrew Kaplowitz with Citigroup. Your line is open.

Operator: Thank you. At this time, I would like to remind everyone to ask question, press star, then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Andrew Kaplowitz with Citigroup. Your line is open.

Speaker #4: We will pause for just a moment to compile the Q&A roster Your first question comes from the line of Andy with Citigroup . Your line is open

Speaker #5: Close enough . How's everyone doing

Andrew Kaplowitz: Close enough. How's everyone doing?

Speaker #2: Hey . Good morning .

Michael Larsen: Good morning.

Speaker #3: Good morning .

Erin Linnihan: Good morning.

Speaker #5: Hey . Good morning . So I know it's early in the year , but when you think about growth in the segments , is it fair to say that your CapEx businesses such as test measurement of welding , are trending ahead of your expectations , but maybe consumer , you know , specialty , I guess , and food equipment was more institutional , a little below and they just kind of net out like , how are you thinking about growth by segment versus your original expectations

Andrew Kaplowitz: Good morning. I know it's early in the year, when you think about growth in the segments, is it fair to say that your CapEx businesses, such as Test & Measurement or Welding, are trending ahead of your expectations? Maybe consumer, you know, Specialty Products, I guess, and Food Equipment was more institutional or a little below, and they just kinda net out. Like, how are you thinking about growth by segment versus your original expectations?

Speaker #2: Yeah . So Andy , as we've indicated , we expect all seven segments to show a positive organic growth this year . I think you've characterized the first quarter pretty well .

Christopher O'Herlihy: Andrew Kaplowitz, as we've indicated, we expect all 7 segments to show a positive organic growth this year. I think you've characterized Q1 pretty well. You know, I think what we saw is, as CapEx without a segment's late Test & Measurement and Welding, you know, Test & Measurement and Electronics, obviously, particularly in semiconductors and electronics, as Michael Larsen indicated, you know, grew more than 15%. I would say with continued order strength here into Q2. Welding, you know, it's been a tough environment for a few years, but we grew 6% in Q1. Mixture of some strong order activity, again, which continues into Q2 and continued improvement in CBI.

Speaker #2: You know , I think what we saw is CapEx related segments like test measurement and welding test and measurement . Obviously , particularly in semiconductors and electronics , as Michael indicated , you know , grew more than 15% .

Speaker #2: And I would say with continued order strength here into Q2 Welding, you know, it's been a tough environment for a few years, but we grew 6% in Q1 — mixture of strong order activity again, which continues into Q2, and continued improvement in CBA.

Speaker #2: And I think encouraging on welding . The strength was pretty broad based . It wasn't just an industrial markets , which we started seeing in Q4 , but it also in Q1 bled into the the commercial platforms as well .

Christopher O'Herlihy: I think encouraging on Welding, the strength was pretty broad-based. It wasn't just in industrial markets, which we started seeing in Q4, but it also in Q1, bled into the commercial platforms as well. Certainly on those, on those CapEx-led markets, I think very strong strain, strong order activity. Then on the more challenged consumer-facing markets, even though they're challenged, we continue to outgrow those markets. If we look at Automotive as a prime example, where we again demonstrated, you know, a couple of hundred basis points of improvement over the market. Similarly, in construction and in even in areas like Polymers & Fluids, where automotive aftermarket, we showed a very healthy market outgrowth, versus retail point of sales and automotive aftermarket.

Speaker #2: So certainly on those on those CapEx related markets , I think very strong strength , strong order activity . And then on the on the more challenged consumer facing markets , even though they're challenged , we continue to outgrow those markets .

Speaker #2: If we look at automotive as a prime example , where we , again , demonstrated , you know , a couple hundred basis points of improvement over the market .

Speaker #2: Similarly , in construction and even in areas like polymers and fluids , where automotive aftermarket , we showed a very healthy market of growth versus retail point of sales and automotive aftermarket .

Speaker #2: So , you know , I think it's a tale of two markets right now . We're seeing the industrial markets , CapEx markets very strong , great order activity .

Christopher O'Herlihy: You know, I think it's a tale of two markets right now. We're seeing the industrial markets, CapEx markets, very strong, great order activity. Even in those consumer-facing markets, which are improving a little bit, you know, we're outgrowing those markets.

Speaker #2: But even in those consumer-facing markets, which are improving a little bit, you know, we’re all growing those markets.

Speaker #5: So for Chris and maybe similar question on margin for for you or Michael , like you reiterated the incrementals for the year in the mid to high 40s .

Andrew Kaplowitz: It's helpful, Chris. Maybe similar question on margin for you or Michael. Like you reiterated the incrementals for the year in the mid to high forties. Are you getting there at all differently? 'Cause I mean, Test and Measurement and Auto look good, but Food Equipment obviously was lower. Was that just called lower absorption in the quarter and it gets better from here? Are you seeing increased inflation sort of impact you at all? Like how do you think about that?

Speaker #5: Are you getting there at all differently ? Because I mean , test measurement and auto look good , but food equipment obviously was lower .

Speaker #5: Was that just call it lower absorption in the quarter and it gets better from here . Are you seeing increased inflation sort of impact you at all .

Speaker #5: Like how do you think about that

Speaker #3: Yeah, I think, Andy, overall the incremental margin assumptions, the operating margin assumptions, are unchanged from where we were when we gave guidance on our last call.

Michael Larsen: I think, Andy, overall, the incremental margin assumptions, the operating margin assumptions are unchanged from where we were when we gave guidance on our last call. We continue to expect incrementals in the mid to high forties, and we expect to improve operating margins by 100 basis points this year. You know, seasonally, Q1, as we talked about on the last call, always starts out a little lower, and then margins and incrementals improve sequentially as we go through the year. We also expect, based on current run rates, you know, that we will see some increased operating leverage as we go through from Q1 to Q2 and into the back half of the year.

Speaker #3: We continue to expect incrementals in the mid to high 40s. And we expect to improve operating margins by 100 basis points this year.

Speaker #3: You know , seasonally Q1 , as we talked about on the last call , always starts out a little lower . And then margins and incrementals improve sequentially as we go through the year .

Speaker #3: We also expect based on current run rates , you know , that we will see some increased operating leverage as we go through from Q1 to Q2 and into the back half of the year .

Speaker #3: So overall , the margin expectations , as I think Chris said , is that every one of our segments will improve operating margins this year .

Michael Larsen: Overall, the margin expectations, as I think Chris said, is that every one of our segments will improve operating margins this year. Obviously, the ones that are benefiting from some positive demand trends in particular, should be expected to maybe outperform a little bit on those incrementals. Just a word on food. I'd say, certainly an anomaly in that segment in terms of the margin performance and the incrementals in Q1. It's really an isolated challenge in one particular end market on the institutional side, and it relates back to the month of January. We did see improving demand trends in FEG, in Food Equipment, as well as in that particular end market as we went through February, March, and April.

Speaker #3: Obviously , the ones that are benefiting from some positive demand trends in particular should be expected to maybe outperform a little bit on those Incrementals just a word on food , I'd say certainly an anomaly in in that segment in terms of the margin performance and the incrementals in the first quarter , it's really an isolated challenge in one particular end market on the institutional side .

Speaker #3: And it relates back to the month of January . So we did see improving demand trends in Fiji , in food equipment , as well as in that particular end market .

Speaker #3: As we went through February , March and April . But it's certainly something we will continue to keep a close , close eye on .

Michael Larsen: But it's certainly something we will continue to keep a close eye on. I would just add, while we're on margins that, while some of the more growth challenged businesses Christopher talked about, Polymers & Fluids, maybe automotive, construction, continue to execute at a very high level. You see that despite some of these top-line challenges, they continue to expand margins, which is really encouraging.

Speaker #3: I would just add , while we're on margins that while some of the more growth challenged businesses we Chris talked about parmesan fluids , maybe automotive construction continue to execute at a very high level .

Speaker #3: And you see that that despite some of these top line challenges , they continue to expand margins , which is really encouraging

Speaker #5: , very helpful

Andrew Kaplowitz: Very helpful.

Speaker #4: Your next question comes from the line of Jamie Cook with Truist Securities . Your line is open .

Cath: Your next question comes from the line of Jamie Cook with Truist Securities. Your line is open.

Operator: Your next question comes from the line of Jamie Cook with Truist Securities. Your line is open.

Speaker #6: Hi . Good morning . I guess just my first my first question , can you just , you know , help us understand ?

Jamie Cook: Hi. Good morning. I guess just my first question, can you just, you know, help us understand, I mean, last quarter it sounded like you were pretty, you know, positive on, you know, short cycle momentum, things improving. You know, your confidence level today with some of the, you know, uncertainty related to, you know, the war with Iran and macro and whether you saw any change in sort of the cadence of sales throughout the quarter or into April.

Speaker #6: I mean , last quarter , it sounded like you were pretty , you know , positive on , you know , short cycle momentum , things improving , you know , your confidence level today with some of the , you know , uncertainty related to , you know , the war with Iran and macro and whether you saw any change in sort of the cadence of sales throughout the quarter or into April .

Speaker #6: And then my second question , can you just give us an update on , you know , CBI , the contribution expected for 2026 in , you know , whether you're contemplating other parts of the portfolio that we're having a harder time with CBI .

Jamie Cook: My second question, can you just give us an update on, you know, CBI, the contribution expected for 2026, and, you know, whether you're contemplating other parts of the portfolio that were having a harder time with CBI, perhaps there's opportunities to, you know, refocus, you know, to certain product lines which are being more successful versus not. Thank you.

Speaker #6: So perhaps there's opportunities to , you know , refocus , you know , to certain product lines , which are being more successful versus not .

Speaker #6: Thank you

Speaker #3: Yeah . Thank you Jamie . So maybe I'll take the first part and then hand it over to you , Chris , for the CBI question .

Michael Larsen: Thank you, Jamie. Maybe I'll take the first part and then hand it over to you, Chris, for the CBI question. I'd say in terms of overall confidence, you know, let's start with the context that we came in right along with our plan for Q1. You know, we talked about on the last call that we expected a step down from Q4 to Q1. We actually on the top line, did a little bit better than that. I would say, if anything, we are more confident today. As we sit here today, I think it's important to mention that our guidance today is based on the current levels of demand that we're seeing in these businesses.

Speaker #3: I'd say in terms of overall confidence , you know , let's start with the context that we came in right along with our plan for the first quarter .

Speaker #3: You know , we talked about on the last call that we expected a step down from Q4 to Q1 . And we actually , on the top line did a little bit better than that .

Speaker #3: So I would say , if anything , we are more confident today as we sit here today , I think it's important to mention that our guidance today is based on the current levels of demand that we're seeing in these businesses and in some of these businesses , maybe welding and test and measurement in particular , we are seeing order rates that are meaningfully higher than the organic growth rates that those segments put up in the fourth quarter .

Michael Larsen: In some of these businesses, maybe Welding and Test & Measurement and Electronics in particular, we are seeing order rates that are meaningfully higher than the organic growth rates that those segments put up in Q1. That is not included in our guidance today. Again, based on kind of our past practice, this is based on, you know, current run rates. I think certainly, maybe a little bit more of a challenge in maybe a place like Food Equipment, which we just talked about. We believe as we sit here today, we have more than enough strength in those CapEx related and semi-related segments to offset any challenges there.

Speaker #3: In the first quarter , that is not included in our guidance today . Again , based on kind of our past practice , this is based on , you know , current run rates .

Speaker #3: And I think certainly maybe a little bit more of a challenge in maybe a place like food equipment , which we just talked about , but we believe as we sit here today , we have more than enough strength in those CapEx related .

Speaker #3: And semi related segments to offset any challenges there . And like I said , we're we're more confident in our organic growth guidance of 1 to 3 today than we were on the last call .

Michael Larsen: Like I said, we're more confident in our organic growth guidance of 1% to 3% today than we were on the last call. That's maybe how I would think about it. I would just one last word on automotive, because automotive did have a slower start in China, you need to factor in that automotive builds in China were down 10% in Q1, and they are projected to be flat here in Q2. We're expecting a pretty meaningful ramp from Q1 to Q2, with sequential growth in kind of the low to mid-single digits. We expect meaningful sequential margin improvement, more than 100 basis points. We expect incremental margins to improve.

Speaker #3: So that's maybe how I would think about it . I would just just one last word on automotive , because automotive did have a slower start in China .

Speaker #3: So you need to factor in that automotive builds in China were down 10% in Q1, and they are projected to be flat here in Q2.

Speaker #3: So we're expecting a pretty meaningful ramp from Q4 from Q1 to Q2 with sequential growth in the in kind of the low to mid single digits , we expect meaningful sequential margin improvement , more than 100 basis points .

Speaker #3: We expect incremental margins to improve . And if you just look at the the cadence that we outlined , which I think was your other question , you know , the EPS bit 48 to 52 .

Michael Larsen: If you just look at the cadence that we outlined, which I think was your other question, you know, the EPS bit $48 to $52. We just did $23 in Q1, which is exactly what we said on the call last time. That would imply that for Q2, the EPS contribution would be about 25% to the full year. As we sit here today, we feel very, very confident in our ability to deliver both Q2 and the full year.

Speaker #3: We just did 23 in Q1 , which is exactly what we said on the call last time . That would imply that for the second quarter , the EPS contribution would be about 25% to the full year .

Speaker #3: And as we sit here today , we we feel very , very confident in our ability to deliver both Q2 and the full year .

Speaker #2: And then , Jamie , on your question on CBI and , you know , although the opportunity profile in a little different segment to segment divisions of division , what I would say is that , you know , we have strong momentum right across the company on CBI .

Christopher O'Herlihy: Jamie, on your question on CBI, you know, although the opportunity profile on CBI can look a little different segment to segment, division to division, what I would say is that, you know, we have strong momentum right across the company on CBI, and we're really encouraged by the progress that we're making in every segment. We continue to see this in increasing strength in our pipeline of new products. It's one of the reasons why even in some of these slower growth markets, we're outperforming those markets. We've several successful new product launches this year across the portfolio. If I was to call out segments, I could call out all seven, but I would say Welding, Test and Measurement, Food Equipment, and Automotive.

Speaker #2: And we're really encouraged by the progress that we're making in every segment . We continue to see this in increasing strength in our pipeline of new products .

Speaker #2: It's one of the reasons why, even in some of these slower growth markets, we're outperforming those markets. We've had several successful new product launches this year across the portfolio.

Speaker #2: If I was to call out segments , I could call it all seven , but I would say a welding test , a measurement , food equipment , and automotive , you know , good progress in 25 , obviously in in CBI yield 40 basis points of improvement .

Christopher O'Herlihy: You know, good progress in 2025, obviously in CBI yield, 40 basis points of improvement. Based on what we see in Q1, we were tracking really well here to deliver incremental improvement in 2026 on the path to 3% plus here by 2030 if not before. Patent filings as well continue to be strong, obviously up very strongly in the last couple of years, 18% in 2024, 9% in 2025. We see additional increases in 2026. As we said before, you know, patent filings continues to be a very strong leading indicator of CBI at ITW given the customer back nature of our innovation, which means that more often than not, patent filings are there to protect important customer solutions.

Speaker #2: And , and based on what we see in Q1 , we we're tracking really well here to deliver incremental improvements in 2026 on the path to 3% plus here by 2030 , if not before patent filings as well .

Speaker #2: Continue to be strong , obviously , up very strongly in the last couple of years , 18% in 24 and 9% in 25 .

Speaker #2: And we see additional increases in 2026 . And and as we've said before , patent filings continues to be a very strong leading indicator of CBI at its given the customer back nature of our innovation , which means that more often than not than not patent filings are there to protect important customer solutions and so increased packing activity is often pretty well correlated with future revenue growth .

Christopher O'Herlihy: Increased patent activity is often pretty well correlated with future revenue growth. Really feel very positive of what we're seeing in terms of the engagement, the enthusiasm, the followership around CBI. We're now starting to see this come true in patent filings and yield.

Speaker #2: So , so really feel very positive about what we're seeing in terms of the engagement , the enthusiasm , the followership around CBI .

Speaker #2: And we're now starting to see this come true in patent filings and yield

Speaker #6: Thank .

Jamie Cook: Thank you.

Speaker #7: You

Speaker #4: Your next question comes from the line of Tammy Zaccaria with JP Morgan . Your line is open

Cath: Your next question comes from the line of Tami Zakaria with JPMorgan. Your line is open.

Operator: Your next question comes from the line of Tami Zakaria with JPMorgan. Your line is open.

Speaker #8: Hi . Good morning . Thank you so much . I have one question and it's rather long term driven question . As you think about your food equipment business , how do you view the proliferation of GLP one drugs and its impact on demand from restaurants and the hospitality industry ?

Tami Zakaria: Hi. Good morning. Thank you so much.

Tami Zakaria: You're welcome.

Chris O'Herlihy: You're welcome.

Tami Zakaria: I have one question, and it's rather long-term driven question. As you think about your Food Equipment business, how do you view the proliferation of GLP-1 drugs and its impact on demand from restaurants and the hospitality industry? I see you had really strong growth in the quarter from restaurants. You mentioned QSRs. Just longer term, is GLP-1 on your radar as you plan for this segment over the coming few years?

Speaker #8: I see you had really strong growth in the quarter from a restaurants . You mentioned QSR , but just longer term is GLP one on your radar as you plan for this segment over the coming few years ?

Speaker #2: I would say , it's not something we're giving a lot of thought to . I would say GLP one early days . And , and I would also say that if you look at food equipment , you know , restaurants represents a smaller , particularly QSR represents a smaller portion of our business .

Christopher O'Herlihy: I would say, Tami, it's not something we're giving a lot of thought to. I would say GLP-1, early days. I would also say that if you look at Food Equipment, you know, restaurants still represents a smaller, particularly QSR represents a smaller portion of our business. The biggest portion is institutional. We have a sizable restaurant business, but, you know, smaller piece certainly is in QSR, which is probably more directly impacted. I'd say early to tell. It's not something that's on our radar at this point. Like I say, I think particularly as you mentioned QSR, it's not a huge part of our business, although it's growing nicely.

Speaker #2: The biggest portions institutional . We have a sizable restaurant business , but , you know , smaller piece certainly is in is in QSR , which is probably more directly impacted .

Speaker #2: So I'd say early to tell . It's not something that's on our radar at this point . But like I say , I think particularly , as you mentioned , QSR , it's not a huge part of our business , although it's growing nicely .

Speaker #3: And I would just add , as we've said before , Chris , food , equipment is is one of the most fertile segments from an innovation standpoint .

Michael Larsen: I would just add, as we've said before, Chris, Food Equipment is one of the most fertile segments from an innovation standpoint. There's so much room for customer-backed innovation and we would expect that to continue to only accelerate from here and offset any pressures like the ones that you are talking about.

Speaker #3: There's so much room for customer back innovation and , and we would expect that to continue to only accelerate from here . And offset any pressures like the ones that you are talking about .

Speaker #8: Understood . Thank you

Tami Zakaria: Understood. Thank you.

Michael Larsen: Mm-hmm.

Speaker #4: Your next question comes from the line of Stephen Volkmann with Jefferies . Your line is open .

Cath: Your next question comes from the line of Stephen Volkmann with Jefferies. Your line is open.

Operator: Your next question comes from the line of Stephen Volkmann with Jefferies. Your line is open.

Speaker #9: Hey , good morning everybody . I was going to stick with food as well because that QSR comment kind of caught my attention .

Stephen Volkmann: Hi. Good morning, everybody. I was gonna stick with food as well because that QSR comment kind of caught my attention. Do you think that that market is actually turning or is there something that you're doing that's kind of ITW specific there? Yeah, I'll leave it there.

Speaker #9: Do you think that that market is actually turning and or is there something that you're doing that's kind of it specific there ? Yeah , I'll leave it there .

Speaker #2: Yeah , I think it's hard to say . The market's turning . Steve . I do think that we've got some interesting innovations going on in that space .

Christopher O'Herlihy: I think it's hard to say the market's turning, Stephen Volkmann. I do think that we've got some interesting innovations going on in that space. You know, a large, as Michael Larsen mentioned, I mean, the Food Equipment space, very fertile from an innovation standpoint. We have new product launches in all product categories in 2026 here, really, you know, driven around critical customer pain points like, you know, energy, water, labor savings. All those trends are very relevant in QSR. I'm pretty sure that a large part of our QSR growth is coming from innovation.

Speaker #2: You know , a large as Michael mentioned , I mean , the food equipment space , very fertile from an innovation standpoint . We have new product launches in all product categories in 2026 here .

Speaker #2: Really , you know , driven around critical customer pain points like energy , water , labor savings and all those trends are very relevant in QSR .

Speaker #2: So I'm pretty sure that a large part of our QSR growth is coming from innovation .

Speaker #3: And I would just add , and we always talk about this is the strength of the service business . So while there may be , you know , QSR in particular can be a little bit lumpy , I think the service business is more of an annuity type business .

Michael Larsen: I would just add, we always talk about this is the strength of the service business. While there may be, you know, QSR in particular can be a little bit lumpy, I think the service business is more of an annuity type business. You know, our ability to put up 3%, 4%, 5% organic growth on a consistent basis at attractive margins kinda buffers any kinda some of that lumpiness that you might see in the businesses that you're talking about.

Speaker #3: And , you know , our ability to put up three , four , 5% organic growth on a consistent basis at , at a , at a margins kind of buffers any kind of some of that lumpiness that you might see in the businesses that you're talking about

Speaker #9: Got it . Okay . Thank you for that . And then , Michael , it sounded like there was a margin thing that happened in the quarter .

Stephen Volkmann: Got it. Okay. Thank you for that. Then Michael Larsen, it sounded like there was a margin thing that happened in the quarter that was very specific. Should we assume Q2 is kind of back to normal?

Speaker #9: That was very specific . Should we assume two Q is kind of back to normal

Speaker #3: Yeah . I think there was really nothing unusual about Q1 , I'd say other than the slow start . Maybe in food equipment .

Michael Larsen: Yeah, I think there's really nothing unusual about Q1, I'd say, other than the slow start maybe in Food Equipment. I think if you look at kind of the, how the quarter progressed, you know, January started out a little bit slower because of Food Equipment, and then we improved from a growth standpoint in February. Got even better in March. I think March organic was up 4%. In April, we're off to a really good start with organic growth. If you look at our full year guidance range, 1% to 3%, we're probably trending towards the high end of that range here in April. That's really the top line.

Speaker #3: I think if you look at kind of the how the quarter progressed , you know , January started out a little bit slower because of food , equipment .

Speaker #3: And then we improved from a growth standpoint in February , got even better in March , I think March Organic was up 4% .

Speaker #3: And in April we're off to a really good start with organic growth . If you look at our full year guidance range 1 to 3 , we're probably trending towards the high end of that range here in April .

Speaker #3: And and so that's really the top line . And and on margins , we expect a . Sequential improvement . Like I said , from Q1 to Q2 , we just did 25.4 .

Michael Larsen: On margins, we expect a sequential improvement, like I said, from Q1 to Q2. We just did 25.4. We would expect more than 100 basis points of improvement sequentially from Q1 to Q2. That will put it somewhere around, you know, 26.5, 27-ish. A little bit of improvement further from Q2 to Q3 on margins, and as well in Q4. From a growth standpoint, from Q2 to Q3, revenues based on run rates again are kinda about the same in Q3 and Q4. That is all that we need to deliver some meaningful organic growth towards the higher end of the range in the H2 of this year.

Speaker #3: We would expect more than 100 basis points of improvement sequentially from Q1 to Q2 . So that will put it somewhere around , you know , 26.5 , 27 ish .

Speaker #3: And then a little bit of improvement further from Q2 to Q3 on margins and as well in in Q4 from a growth standpoint , from Q2 to Q3 , revenues based on run rates , again , are kind of about the same in Q3 and Q4 .

Speaker #3: But that is all that we need to deliver some meaningful organic growth towards the higher end of the range . In the second half of this year .

Speaker #3: So hopefully that gives you a little bit of context .

Michael Larsen: Hopefully that gives you a little bit of context.

Speaker #9: Very much so . Appreciate it . Thanks

Stephen Volkmann: Very much so. Appreciate it. Thanks.

Speaker #3: Sure .

Michael Larsen: Sure.

Speaker #4: Your next question comes from the line of Julian Mitchell with Barclays . Your line is open .

Cath: Your next question comes from the line of Julian Mitchell with Barclays. Your line is open.

Operator: Your next question comes from the line of Julian Mitchell with Barclays. Your line is open.

Speaker #10: Hi . Good morning . And Michael sorry . There were a couple of other calls going on . But just to clarify your comments on the top line just now , were you referring to sort of total company ?

Julian Mitchell: Hi. Good morning.

Michael Larsen: Good morning.

Julian Mitchell: Michael, sorry, there were a couple of other calls going on, just to clarify, your comments on the top line, just now, were you referring to sort of total company there, in terms of the confidence of getting to the higher end of the range? Just, you know, obviously, we've had some questions on you were just over flat in Q1 and, you know, you've got sort of 2% pegged at the midpoint for the year, and you tend to just guide with run rates, as you say. Is there anything happening on price later in the year maybe that comes in because of cost inflation that gets the growth moving up?

Speaker #10: There in terms of the confidence of getting to the higher end of , of , of the range ? Just , you know , obviously we've had some questions on you were just over flat in Q1 and , you know , you've got sort of 2% pegged at the midpoint for the year , and you tend to just guide with , with run rates , as you say .

Speaker #10: Is there anything happening on price later in the year , maybe that comes in because of cost inflation that gets the growth moving up

Speaker #3: Well , I , I think Julian , there's as we've said before , the first quarter was right in line with our plan .

Michael Larsen: Well, I think, Julian, there's, as we've said before, the Q1 was right in line with our plan. The organic growth rate was as we described it on the last earnings call. How the year is projected to unfold, the way we've modeled it is based on our typical, you know, seasonality. In terms of, maybe just to comment on price, since you asked, I mean, our, we had a plan assumption going into the year around price as well as price cost. Given some of the inflationary pressures that we're seeing, just like everybody else, we, our divisions have reacted from a price standpoint.

Speaker #3: So the organic growth rate was , as we described it , on the last earnings call and how the year is projected to unfold The way we've modeled it is based on our typical , you know , seasonality in terms of maybe just a comment on price , since you asked .

Speaker #3: I mean , our we had a plan assumption going into the year around price as well as price cost , given some of the inflationary pressures that we're seeing , just like everybody else .

Speaker #3: We are divisions have reacted from a price standpoint . We now expect a little bit more price , and that will start to come through primarily in the second quarter .

Michael Larsen: We now expect a little bit more price, and that will start to come through primarily in Q2 and then carry forward into Q3 and Q4. I think it's fair to say maybe there might be a little bit more of a price impact there. Broadly, we are very close to our original plan as we sit here today, including the organic growth projection of 1% to 3%. Nothing has really, you know, changed relative to our guidance other than, as we said, we've seen some really positive demand trends in two segments in particular.

Speaker #3: And then carry forward into Q3 and Q4 . So I think it's fair to say maybe there might be a little bit more of a of a price impact there , but broadly , we are very close to our original plan as we sit here today , including the organic growth projection of 1 to 3 , nothing has really , you know , changed relative to our guidance other than , as we said , we've seen some really positive demand trends in two segments .

Speaker #3: In particular

Speaker #10: That's helpful . Thank you . And when we're looking at the operating margin guidance , you know , you're off to a good start versus that 70 bips or so acceleration .

Julian Mitchell: That's helpful. Thank you. When we're looking at the operating margin guidance, you know, you're off to a good start versus that 70 basis points or so acceleration that's guided for margins at the midpoint for the year as a whole. If we're thinking about some of the margins that were weakest, I think Food Equipment you've dealt with already. Anything in Welding that we should think about over the balance of the year, the margins there perhaps picking up steam?

Speaker #10: That's guided for margins at the midpoint for the year as a whole . If we're thinking about some of the margins that were weakest , I think food equipment you've dealt with with already anything in , in welding that we should think about over the balance of the year , the margins there perhaps picking up steam and sort of company wide is operating leverage fairly steady as you move through 2026 ?

Michael Larsen: Yeah.

Julian Mitchell: Sort of company-wide, is operating leverage fairly steady as you move through 2026?

Speaker #3: Yeah . I mean , what I can tell you , Julian , is that as we sit here today , we would expect every segment to improve margins in Q2 relative to Q1 .

Michael Larsen: Yeah. I mean, what I can tell you, Julian, is that, as we sit here today, we would expect every segment to improve margins in Q2 relative to Q1. Then we would expect sequential improvement to those margins, again in every segment in Q3 and into Q4. Now, like we've said before, and you mentioned Welding specifically, you know, those are, as you know, best in class operating margins by a fair margin.

Speaker #3: And then we would expect sequential improvement to those margins again , in every segment in Q3 . And into Q4 . Now , like we've said before , and you mentioned welding specifically .

Speaker #3: You know , those are , as you know , best in class operator operating margins by by a fair margin . So you would expect maybe to see less improvement in the segments that have margins at or above 30% .

Michael Larsen: You would expect maybe to see less improvement in the segments that have margins at or above 30%, and you should expect to see a lot more improvement in places like Test & Measurement. Which, there's a little bit of impact from some recent acquisition activity, but as volume and price begins to pick up as we go through the year, you're gonna see some really solid operating leverage in the Test & Measurement business as well.

Speaker #3: And you should expect to see a lot more improvement in places like test and measurement , which there's a little bit of impact from some recent acquisition activity .

Speaker #3: But as volume and price begins to pick up , as we go through the year , you're going to see some really solid operating leverage in the test and measurement business as well .

Speaker #2: And Julian , I would just add to that that we have really good line of sight on the 100 basis , at least 100 basis points of enterprise initiatives

Christopher O'Herlihy: Julian, I would just add to that we have really good line of sight on at least 100 basis points of improvement of net price initiatives.

Speaker #10: helpful . Thank you

Julian Mitchell: That's helpful. Thank you.

Speaker #4: Your next question comes from the line of Andrew Obin with Bank of America . Your line is open

Cath: Your next question comes from the line of Andrew Obin with Bank of America. Your line is open.

Operator: Your next question comes from the line of Andrew Obin with Bank of America. Your line is open.

Speaker #11: Morning . This is David on for Andrew Obin Look , I , I think you've been very clear on expecting improvements in organic growth into the second quarter , calling out specifically for food equipment segment .

David Ridley-Lane: Morning. This is David Ridley-Lane laying on for Andrew Obin.

Michael Larsen: Morning. Morning.

David Ridley-Lane: I think you've been very clear on you're expecting improvements in organic growth into Q2, calling out specifically for the Food Equipment segment that's looked positive. What about the Specialty Products segment?

Speaker #11: That's a positive . What about the specialty products segment ?

Speaker #3: Yeah . So I think a little bit of an impact from the Middle East , kind of delayed sales in the aerospace business , which is sitting on , you know , significant order and , and backlog that those sales have been delayed .

Michael Larsen: I think a little bit of an impact from the Middle East, kind of delayed sales in the aerospace business, which is sitting on, you know, significant order and backlog, that those sales have been delayed. That was about that and the combination of PLS efforts that are somewhat, I'd say, front end loaded this year, reduced the overall organic growth rate by 3 points in Specialty in Q1. We would expect that growth rate in Specialty to improve from here. I'd say the equipment businesses in Specialty are performing very well.

Speaker #3: So that was about a combined that and the combination of PLS efforts that are somewhat , I would say front end loaded this year reduced the overall organic growth rate by three points .

Speaker #3: In specialty in the in the first quarter , we would expect that growth rate in specialty . To improve from here , I'd say the equipment , businesses and specialty are performing very well .

Speaker #3: And then in some of the more consumer oriented businesses , there are some challenges . As we as you are well aware , as Chris talked about .

Michael Larsen: In some of the more consumer-oriented businesses, there are some challenges, as you are well aware, as Chris talked about. There are places like the medical business that is growing leaps and bounds at this point in time. It's really, you know, all those factors offsetting each other. As we said, we expect the Specialty Products business to deliver positive organic growth this year, and meaningful margin improvement based on what we're seeing in the businesses that make up Specialty Products as we sit here today.

Speaker #3: And then there are places like the medical business that is growing leaps and bounds at this point in time . So it's really , you know , all those factors offsetting each other and , and as we said , we expect the , the specialty business to deliver positive organic growth this year and meaningful margin improvement based on what we're seeing in the businesses that make up specialty .

Speaker #3: As we sit here today .

Speaker #11: Thank you . And then with the Supreme Court's ruling against the tariffs , several manufacturing companies have filed for refunds . Where do you stand in that process for yourself ?

David Ridley-Lane: Thank you. With the Supreme Court's ruling against the IEEPA tariffs, several manufacturing companies have filed for refunds. Where do you stand in that process, for yourself?

Speaker #2: So , you know , given with respect to tariff recovery , I mean , given our producer , we sell a philosophy . I mean , the reality is the direct impact of tariffs was largely mitigated at GW and , you know , to the extent that there was an impact , we were able to recover this in price .

Christopher O'Herlihy: You know, With respect to tariff recovery, I mean, given our manufacture-where-we-sell philosophy, I mean, you know, the reality is the direct impact of tariffs was largely mitigated at ITW. You know, to the extent that there was an impact, we were able to recover this in price. In this regard, tariff recovery is not something that's on our radar, I would say, and we certainly don't have anything in our guidance for it.

Speaker #2: So in this regard , tariff recovery is not something that's on our radar . I would say . And we certainly don't have anything in our guidance for it

Speaker #11: Thank you very much .

David Ridley-Lane: Thank you very much.

Speaker #2: Sure

Christopher O'Herlihy: Sure.

Cath: That concludes today's session. Thank you for participating in today's conference call. All lines may disconnect at this time.

Operator: That concludes today's session. Thank you for participating in today's conference call. All lines may disconnect at this time.

Q1 2026 Illinois Tool Works Inc Earnings Call

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