Manufacturing company Illinois Tool Works (NYSE: ITW) met Wall Street’s revenue expectations in Q1 CY2026, with sales up 4.6% year on year to $4.02 billion. Its GAAP profit of $2.66 per share was 3.7% above analysts’ consensus estimates.

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“ITW delivered a solid start to the year, marked by five percent revenue growth, margin expansion of 60 basis points to 25.4 percent, and a 12 percent increase in GAAP earnings per share to $2.66. Positive demand trends continued in our capex-related segments, led by Welding and Test & Measurement and Electronics, which delivered organic growth of six percent and five percent, respectively, this quarter,” 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 sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Regrettably, Illinois Tool Works’s sales grew at a tepid 4.7% compounded annual growth rate over the last five years. This was below our standard for the industrials sector and is a rough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Illinois Tool Works’s recent performance shows its demand has slowed as its revenue was flat over the last two years.

We can better understand the company’s sales dynamics by analyzing its 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 two-year revenue growth, we can see the company’s core operations (not acquisitions and divestitures) drove most of its results.

This quarter, Illinois Tool Works grew its revenue by 4.6% year on year, and its $4.02 billion of revenue was in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 2.8% over the next 12 months. Although this projection indicates its newer products and services will catalyze 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 25.2%. 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 3.1 percentage points over the last five years, as its sales growth gave it operating leverage.

This quarter, Illinois Tool Works generated an operating margin profit margin of 25.4%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Illinois Tool Works’s EPS grew at 9.1% compounded annual growth rate over the last five years, higher than its 4.7% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into Illinois Tool Works’s earnings to better understand the drivers of its performance. As we mentioned earlier, Illinois Tool Works’s operating margin was flat this quarter but expanded by 3.1 percentage points over the last five years. On top of that, its share count shrank by 9.1%. 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 3.1% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q1, Illinois Tool Works reported EPS of $2.66, up from $2.38 in the same quarter last year. This print beat analysts’ estimates by 3.7%. Over the next 12 months, Wall Street expects Illinois Tool Works’s full-year EPS of $10.77 to grow 5.9%.

Key Takeaways from Illinois Tool Works’s Q1 Results

It was good to see Illinois Tool Works beat analysts’ EPS expectations this quarter. On the other hand, its organic revenue slightly missed and its adjusted operating income fell slightly short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 4.2% to $254.50 immediately following the results.

Should you buy the stock or not? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here (it’s free).