Illinois Tool Works ITW
Industrials · Industrial - Machinery · Synthos Deep Dive · 2026-08-04
The Overview
Illinois Tool Works makes industrial products — fasteners for cars, commercial kitchen equipment, welding gear, test instruments, adhesives, construction fixings. Seven separate businesses, none of them more than a fifth of the company.
It is extremely well run. Out of every dollar of sales, about 26.5 cents is operating profit, which is unusually high for this kind of manufacturing. It gets 24.7 cents of profit per year for every dollar of capital invested, which is excellent. It does all this with only 43,000 employees.
There is one problem and it is simple. In 2022 it sold $15.93 billion of products. In 2025 it sold $16.04 billion. That is 0.7% growth in three years. Profits per share have risen anyway, because the company has kept squeezing more margin out of the same revenue and has bought back exactly $1.5 billion of its own shares every year. Both of those work — until they don't.
The shares cost $295.06 and have risen 17% in three months, to within 1.5% of their highest price of the year. At that price you are paying 24 times what analysts expect the company to earn in 2027, for a business those same analysts think will grow sales 3.7% a year.
Here is the unusual part. Wall Street analysts normally publish price targets above the current price. On this stock, the average target is $280 — five percent BELOW where the shares trade. The single most optimistic target on the street is $301, two percent above. And nine of the 28 analysts covering the company have a "sell" rating, against six "buys". That is the most negative professional view of any company in this research batch, and the shares are near a record high anyway.
Our own estimate of fair value is $270, which is about 8.5% below the price. In a bad case the shares fall to around $214; in a good case they reach around $336. That is roughly fifty cents of possible gain per dollar of possible loss — the worst ratio of anything we looked at this week. So: Hold. A good company, at a price that has run ahead of it.
One honesty note. For most companies we check the vendor's numbers against the actual documents filed with regulators. For this one we could not. The copies we hold contain only the written discussion, not the financial tables — and the June-quarter filing is not in the archive at all. So every number in this document that came from the data vendor is labelled unverified. That is a real limit and it is why our confidence ratings are moderate rather than high.
- Downside Risk 5/10. Superb operations, levered balance sheet by choice, cyclical end markets.
- Growth Quality 4/10. The lowest in this batch. Four years of flat revenue.
- Exponential Potential 2/10. A superior operating method applied to seven mature markets.
Putting a number on it: our fair-value estimate is $270 against a current price of $280.10 — a premium price for a business we still like.
Our summary metrics
"Rated 5 — operationally about as safe as an industrial gets, financially levered by choice, and cyclically exposed at both ends. The operating supports are genuine and among the best in this batch: a 26.5% trailing operating margin, a 24.7% return on invested capital, a 44.2% gross margin, interest coverage of 14.45x, and `netDebtToEBITDATTM` of 1.91x. Seven segments across automotive components, food equipment, test and measurement, welding, polymers, construction and specialty products give real end-market diversification, and the 80/20 operating discipline the company has run for decades is visible in the fact that operating margin rose from 23.8% to 26.3% across four years of flat revenue. Against that, three items. Shareholders' equity is $3,225 million against $5,689 million of goodwill and intangibles, so TANGIBLE book value per share is NEGATIVE $9.54 and the 29.2x price-to-book and 101.7% return on equity are artefacts of $26,875 million of treasury stock, not statements about the business — they are rejected with the mechanism shown. Total debt is $8,969 million against $3,225 million of equity, a 3.35x ratio, and short-term debt rose from $1,555 million to $2,286 million in FY2025. And the end markets are cyclical in a way the margin does not reveal: Automotive OEM is the largest segment at $3,288 million, 20.5% of FY2025 revenue, and Construction Products fell 4.7% year on year to $1,820 million."
"Rated 4 — the lowest growth score in this batch, and the number that earns it is four years long. Revenue: $15,932M (FY2022), $16,107M (FY2023), $15,898M (FY2024), $16,044M (FY2025). That is 0.7% cumulative growth across three years, with two of them negative. Reported EPS did rise — $9.77, $9.74, $11.71, $10.49 — but FY2024's $11.71 contains a one-off gain (the September 2024 quarter shows pre-tax income of $1,362M against operating income of $1,052M, a $310M non-operating item), and FY2025's $10.49 is a 10.4% DECLINE on it. The June 2026 quarter was better: revenue $4,301M, up 6.1%, operating income $1,147M, up 7.4%, diluted EPS $2.84 against $2.58, up 10.1%, and a 1.8% beat against a $2.79 estimate. Consensus wants $11.41 in FY2026 (11 analysts), $12.29 in FY2027 (12) and $13.05 in FY2028 (8) — 9.1%, then 7.7%, then 6.2% — on revenue growth of 4.8%, 3.7% and 3.1%. What holds this at 4: roughly half of the forecast EPS growth is margin expansion on a base already at 26.5% and a $1.5 billion annual buyback that has run at exactly that figure for four consecutive years, and the revenue line has to inflect from four years of nothing to 4-5% for the rest to work."
"Rated 2 — a genuinely superior operating system attached to seven mature industrial markets. The thing Illinois Tool Works actually owns is a management method: decentralised businesses run on an 80/20 discipline that systematically prunes the low-volume tail, which is why a company with flat revenue has expanded operating margin 250 basis points in four years and earns 24.7% on invested capital while employing only 43,000 people to produce $16 billion of revenue — $373,000 of revenue per employee. That is a real and durable competitive advantage and it is worth a premium multiple. What it is not is a growth engine. The seven segments are automotive fasteners and components, commercial kitchen equipment, test instruments, welding consumables, adhesives and lubricants, construction fasteners, and specialty products — every one of them a mature market growing at or slightly above industrial production. Capital expenditure is $419 million on $16 billion of revenue, 2.6%, and research spending is not separately disclosed. Acquisitions have been minimal: $107 million in FY2025 against $1,500 million of buyback. A 2, not a 1, because the margin engine is genuinely still working and because 80/20 applied to an acquired business is a repeatable value-creation mechanism. A 2, not higher, because the company has chosen — deliberately and for decades — to return capital rather than to compound into new markets, and the arithmetic of that choice is a share count falling 2% a year rather than a business growing."
What does “fair value” mean?
Fair value is Synthos’s estimate of what one share is worth today, based on our model of the company’s future cash generation and the risks to it. It is not a price target or a prediction of where the stock trades next quarter — it’s the price where we think risk and reward are balanced. Above it, you’re paying for outcomes better than our base case; below it, the market is offering a margin of safety.
The model’s inputs and weightings are proprietary — they’re the product. What we publish is the output, plus an independent, public-math cross-check further down the page (“Check our number”) so you can judge it for yourself.
What do the 5 tiers mean? (Core · Tactical · Watch · Hold · Avoid)
The Road Ahead
What we expect to matter in each window, and the evidence that would prove us wrong.
Short term 0-6 months
No differentiated view- Driver
- "The clearest valuation headwind in this batch, and the street says so itself. Illinois Tool Works closed 2026-08-04 at $295.06, up 2.28% on the day, which is 10.5% above a 50-day moving average of $267.11, 12.4% above the 200-day of $262.56, and only 1.52% below the 52-week high of $299.60. RSI is 67.1 and MACD is +6.71. Three-month return is +17.25% against SPY's +7.59%. And the consensus price target is $280 — 5.1% BELOW the current price — with an analyst HIGH of $301 that is 2.0% above it and NINE SELL ratings among 28 analysts against six buys. That is the most bearish sell-side distribution in this batch and it is unusual to see it on a stock making new highs. Our own base fair value of $270 is 8.5% below spot, which puts us marginally below the street rather than at odds with it. The June-quarter print on 2026-07-28 was fine — revenue +6.1%, diluted EPS +10.1%, a 1.8% beat — and it does not change the arithmetic: at 24.0x FY2027 consensus with 3.7% forecast revenue growth, the multiple is doing all the work."
- What we’re watching
- "The 2026-10-23 print against consensus adjusted EPS of $2.97 and revenue of $4,243M. Within it, the only number that matters is organic revenue growth by segment — specifically whether the June quarter's 6.1% consolidated growth was the beginning of an inflection or a comparison effect against a soft June 2025. Watch Automotive OEM, the largest segment at $3,288M of FY2025 revenue and directly exposed to global light-vehicle build rates; Construction Products, which FELL 4.7% year on year in FY2025 to $1,820M; and the operating margin, at 26.5% trailing against a 23.8% level four years ago — margin expansion is roughly half the consensus EPS growth and there is a limit to it. Also watch the buyback, which has run at exactly $1,500 million in each of FY2023, FY2024 and FY2025 and is therefore a policy rather than an opportunistic programme. And note that the September 2026 10-Q would be the first quarterly filing in this archive since March 2026."
- Confidence
- Medium
Medium term 6-24 months
Neutral- Driver
- "The medium-term case is entirely about whether revenue inflects, because everything else is already working. The operating machine is in good order: a 26.5% trailing operating margin against 23.8% in FY2022, a 24.7% return on invested capital, 14.45x interest coverage, and 1.91x net leverage. The June quarter showed revenue up 6.1% and operating income up 7.4% — the first quarter in some time in which the top line contributed more than the margin. Consensus has EPS at $11.41, $12.29 and $13.05 across FY2026-FY2028 on revenue growth of 4.8%, 3.7% and 3.1%, and against a four-year base of 0.7% cumulative growth that revenue forecast is the assumption to test. Capital return is steady and unglamorous: $1,500 million of buyback in each of the last three years, plus $1,785 million of dividends in FY2025 at a $6.44 trailing rate, a 2.18% yield and a 42.9% payout — combined roughly 3.9% of the market capitalisation. The balance sheet supports it. What makes the stance neutral rather than tailwind is that a 24.0x forward multiple on 3.7% revenue growth requires the market to keep paying for quality at a level it has rarely sustained, and the sell-side consensus target already sits below the price."
- What we’re watching
- "Whether organic revenue growth exceeds 4% for two consecutive quarters — that single fact would convert a quality premium into a growth multiple. Whether the operating margin can go beyond 27%; it has risen 250 basis points in four years and each further point is harder. Whether Automotive OEM, 20.5% of revenue, holds through a global vehicle-production cycle that is being reshaped by tariffs and electrification. Whether Construction Products stabilises after a 4.7% FY2025 decline. Whether the company begins deploying capital into acquisitions rather than buybacks — $107 million of acquisitions against $1,500 million of repurchase in FY2025 is a deliberate allocation choice, and a change in it would be the clearest signal management sees growth available. Whether the dividend, raised annually for decades, continues to grow faster than earnings on a 42.9% payout. And whether the nine sell-rated analysts are proved right; the street's consensus target of $280 has been below the market price for at least the length of the current advance."
- Confidence
- Medium
Long term 2+ years
Tailwind- Driver
- "Across a full cycle this is a business we would be pleased to own at the right price, and the reason is the operating system rather than any end market. Illinois Tool Works produces $16 billion of revenue with 43,000 employees — $373,000 per employee — at a 26.5% operating margin and a 24.7% return on invested capital, across seven segments with no single one above 20.5% of revenue. That combination of margin, capital efficiency and diversification is rare, and it follows from a decentralised 80/20 discipline the company has applied for decades: prune the low-volume tail, concentrate on the profitable core, push decision-making to the business unit. It survives chief executives — Christopher A. O'Herlihy holds the role and the previous incumbent, Ernest Scott Santi, remains on the board with 266,128 shares. Free cash flow has exceeded $2.7 billion in three of the last four years on capital expenditure of roughly $420 million, and the company has returned $3.2-3.3 billion a year to shareholders while holding leverage under 2x. Over ten years the compounding here will be satisfactory. The question this dive answers is whether it is satisfactory from 24.0x forward earnings with revenue flat for four years, and the answer is no."
- What we’re watching
- "Whether flat revenue is a phase or a destination. Sales of $16,044 million in FY2025 against $15,932 million in FY2022 is the single most important series in this file, and a diversified industrial that does not grow eventually re-rates to a utility multiple regardless of how good its margins are. Whether the margin engine has a ceiling — 26.5% is already exceptional for this mix of businesses. Whether the negative tangible equity position (minus $9.54 per share, produced by $26,875 million of treasury stock) ever becomes a constraint; it has not, and it removes the cushion for a large impairment against $5,689 million of goodwill and intangibles. Whether Automotive OEM, the largest segment, survives the transition in global vehicle architecture — ITW supplies fasteners, plastic and metal components and assemblies, and the content per vehicle question is real. Whether the geographic mix shifts: the FY2025 disclosure shows Europe at $4,162 million and Asia Pacific at $3,079 million against United States at $7,395 million, so 53.9% of revenue is non-US. And chief-executive succession, on which the file contains no disclosure."
- Confidence
- Medium
Exponential Potential
"Rated 2 — a genuinely superior operating system attached to seven mature industrial markets. The thing Illinois Tool Works actually owns is a management method: decentralised businesses run on an 80/20 discipline that systematically prunes the low-volume tail, which is why a company with flat revenue has expanded operating margin 250 basis points in four years and earns 24.7% on invested capital while employing only 43,000 people to produce $16 billion of revenue — $373,000 of revenue per employee. That is a real and durable competitive advantage and it is worth a premium multiple. What it is not is a growth engine. The seven segments are automotive fasteners and components, commercial kitchen equipment, test instruments, welding consumables, adhesives and lubricants, construction fasteners, and specialty products — every one of them a mature market growing at or slightly above industrial production. Capital expenditure is $419 million on $16 billion of revenue, 2.6%, and research spending is not separately disclosed. Acquisitions have been minimal: $107 million in FY2025 against $1,500 million of buyback. A 2, not a 1, because the margin engine is genuinely still working and because 80/20 applied to an acquired business is a repeatable value-creation mechanism. A 2, not higher, because the company has chosen — deliberately and for decades — to return capital rather than to compound into new markets, and the arithmetic of that choice is a share count falling 2% a year rather than a business growing."
What could take this further than the base case — and where the market may be underpricing it. Full forward-growth and acceleration math in Deeper analysis, §4 below.
Deeper analysis
Technicals, fundamentals, valuation, and the full expert-claim evidence panel — the detail behind the numbers above.
> ## DATA BANNER — PROSE-ONLY FILINGS, AND NO JUNE-QUARTER 10-Q
> The SEC extraction for Illinois Tool Works contains ZERO [TABLE] markers in the 10-K (265,993 characters) or the 10-Q (84,347 characters) — "tables": false in the manifest, confirmed by direct inspection. No financial statement survived extraction.
> And the archive holds no June-quarter 10-Q. The two quarterly filings present are dated 2025-10-24 (September 2025 quarter) and 2026-05-07 (March 2026 quarter). The latest filing with financial statements in this archive is 2026-03-31.
> The 2026-07-28 earnings-release 8-K carries no Exhibit 99.1 text either.
> Consequence: the capital-expenditure check could not be performed, and no June-quarter figure in this dive is filing-verified. Every number in the financial tables below is vendor-sourced and labelled as such.
Reference table
| Street consensus | $280 — 5.1% BELOW spot · median $280.5 · high $301, only 2.0% above spot · low $254 · 0 strong buy / 6 buy / 13 hold / 9 SELL across 28 analysts, consensus "Hold" — the most bearish distribution in this batch by a wide margin |
| Valuation | 25.9x FY2026E · 24.0x FY2027E · 22.6x FY2028E · 26.75x trailing GAAP diluted · 20.2x EV/EBITDA · 29.2x book and 101.7% return on equity — both artefacts, see Section 6 · tangible book value per share is NEGATIVE $9.54 |
| The number that defines the name | Revenue: $15,932M (FY2022) → $16,107M (FY2023) → $15,898M (FY2024) → $16,044M (FY2025). 0.7% cumulative in three years, two of them negative. Over the same period operating margin rose from 23.8% to 26.3% |
| June quarter (vendor-sourced, NOT filing-verified) | Revenue $4,301M (+6.1%) · operating income $1,147M (+7.4%) · diluted EPS $2.84 against $2.58 (+10.1%) · beat by 1.8% against a $2.79 estimate on revenue 2.7% above estimate |
| Cash generation — vendor-sourced, UNVERIFIED | Trailing operating cash flow approximately $2,619M · trailing capex approximately $318M · trailing free cash flow approximately $2,300M, a 2.70% yield · FY2025 capex $419M against $397M of D&A |
| Capital return | $1,500M of buyback in each of FY2023, FY2024 and FY2025 — an exactly repeated figure, i.e. a policy · dividends $1,785M in FY2025, a $6.44 trailing rate, 2.18% yield, 42.9% payout · combined roughly 3.9% of market capitalisation |
| Conviction | ZERO entity matches in 52,021, and zero homograph noise on a three-letter ticker. One free-text hit and it is about ABB. Diversified industrials confirmed as a genuine sector void |
| Technicals | −1.52% from the 52-week high of $299.60 — the smallest gap in this batch; +22.40% above the low of $241.07; +10.5% above the 50-DMA ($267.11) and +12.4% above the 200-DMA ($262.56); RSI 67.1; MACD +6.71; 3-month +17.25% vs SPY +7.59% |
What the experts actually said
No independent expert claims in the Synthos knowledge base yet for ITW — this dive is fundamentals- and technicals-driven, not panel-driven.
Price & moving averages 12 months · 50 & 200-day averages · 52-week range
Solid line = price · dashed line = 50-day average · dotted line = 200-day average · the two thin horizontal lines mark the 52-week high and low. Price above both averages is an uptrend.
Data summary: last close $280.10, 0% above the 50-day average ($280), 5% above the 200-day average ($266) — an uptrend. 7% below the 52-week high of $300, 16% above the 52-week low of $241.
Bollinger Bands 20-day average ± 2 standard deviations
The shaded band widens when the stock gets more volatile. Riding the upper edge = strong momentum (sometimes stretched); the lower edge = weak / potentially oversold.
Data summary: price $280.10 is currently inside the band (band $277–$299).
RSI (14) momentum gauge · 0–100
Above 70 (overbought zone, shaded) = overbought, below 30 (oversold zone, shaded) = oversold. Currently 44.
MACD 12 / 26 / 9 · trend & momentum
The MACD line crossing above the signal line (bars flip to the up color) = momentum turning up; crossing below (bars flip to the down color) = turning down. Bar height = the size of that gap.
Data summary: MACD is currently below its signal line by 1.70, negative momentum.
Relative performance vs S&P 500 & its sector (XLI (sector)), set to 100 a year ago
Solid = ITW · dashed = S&P 500 · dotted = XLI (sector). A rising line means it is beating that benchmark — the sector line shows whether it is a leader or laggard within its own group.
Forward revenue & earnings actual → estimate · "FY" = fiscal year, "E" = estimate
Darker bars = actual results, brighter = analyst estimates. Taller bars to the right = expected growth.
Key stats an RIA wants
1. What the business is, and the number that defines it
Seven reportable segments. Chief executive Christopher A. O'Herlihy; approximately 43,000 employees at 31 December 2025, of whom approximately 16,000 are in the United States per the 10-K.
FY2025 revenue by segment (seg_prod, which ties — see Section 6):
| Segment | FY2025 | share | FY2024 | YoY |
|---|---|---|---|---|
| Automotive OEM | $3,288M | 20.5% | $3,188M | +3.1% |
| Test & Measurement and Electronics | $2,825M | 17.6% | $2,818M | +0.2% |
| Food Equipment | $2,699M | 16.8% | $2,647M | +2.0% |
| Welding | $1,890M | 11.8% | $1,851M | +2.1% |
| Construction Products | $1,820M | 11.3% | $1,909M | −4.7% |
| Specialty Products | $1,775M | 11.1% | $1,743M | +1.8% |
| Polymers & Fluids | $1,765M | 11.0% | $1,764M | +0.1% |
| Total | $16,062M | $15,920M | +0.9% | |
inc_a revenue | $16,044M | $15,898M | +0.9% |
No segment exceeds 20.5% of revenue. That is genuine diversification and it is the reason the consolidated line is so stable — and so flat. Construction Products is the only segment that moved materially, and it moved down 4.7%.
The four-year revenue series
| FY2021 | FY2022 | FY2023 | FY2024 | FY2025 | |
|---|---|---|---|---|---|
| Revenue | $14,455M | $15,932M | $16,107M | $15,898M | $16,044M |
| Growth | +14.9% | +10.2% | +1.1% | −1.3% | +0.9% |
| Operating income | $3,477M | $3,790M | $4,040M | $4,264M | $4,216M |
| Operating margin | 24.1% | 23.8% | 25.1% | 26.8% | 26.3% |
| Net income | $2,694M | $3,034M | $2,957M | $3,488M | $3,066M |
| Diluted EPS | $8.51 | $9.77 | $9.74 | $11.71 | $10.49 |
| Diluted shares | 316.4M | 310.7M | 303.6M | 297.8M | 292.3M |
| Share repurchase | — | $1,750M | $1,500M | $1,500M | $1,500M |
| Dividends paid | — | $1,542M | $1,615M | $1,695M | $1,785M |
Two readings, and they belong together.
The margin engine is real. Operating margin rose from 23.8% in FY2022 to 26.3% in FY2025 — 250 basis points on flat revenue. That is the 80/20 discipline working: pruning low-volume products, concentrating on profitable core lines, holding price. Very few industrial companies can do it and this one has done it repeatedly.
And it has now covered for three years of no growth. Revenue in FY2025 was 0.7% above FY2022. Reported EPS rose from $9.77 to $10.49 across those three years — 7.4% cumulative, or 2.4% a year — and even that overstates the underlying trend, because FY2024's $11.71 contains a one-off gain: the September 2024 quarter shows pre-tax income of $1,362 million against operating income of $1,052 million, a $310 million non-operating item, and FY2025's $10.49 is a 10.4% DECLINE on that inflated base.
The June 2026 quarter
All figures vendor-sourced and NOT filing-verified — the archive contains no June-quarter 10-Q.
| Q2 2026 | Q2 2025 | change | H1 2026 | H1 2025 | change | |
|---|---|---|---|---|---|---|
| Revenue | $4,301M | $4,053M | +6.1% | $8,317M | $7,892M | +5.4% |
| Gross profit | $1,898M | $1,782M | +6.5% | $3,658M | $3,439M | +6.4% |
| Gross margin | 44.1% | 44.0% | +14 bps | 44.0% | 43.6% | +40 bps |
| Operating income | $1,147M | $1,068M | +7.4% | $2,167M | $2,019M | +7.3% |
| Operating margin | 26.7% | 26.3% | +31 bps | 26.1% | 25.6% | +52 bps |
| Interest expense | $79M | $74M | +6.8% | $152M | $142M | +7.0% |
| Pre-tax income | $1,080M | $998M | +8.2% | $2,047M | $1,893M | +8.1% |
| Net income | $815M | $755M | +7.9% | $1,583M | $1,455M | +8.8% |
| Diluted EPS | $2.84 | $2.58 | +10.1% | $5.50 | $4.96 | +10.9% |
| Diluted shares | 287.0M | 292.9M | −2.0% | 288.1M | 293.7M | −1.9% |
This is the best two quarters the company has had in three years and it should be said plainly. Revenue up 6.1% and 5.4%, operating margin up in both, EPS up 10.1% and 10.9%. Roughly two points of the ten-point EPS growth is the buyback; the rest is genuine.
The four-quarter surprise record is uniformly small: +1.8% (June 2026), +3.5% (March 2026, $2.66 vs $2.57), +1.1% (December 2025, $2.72 vs $2.69), +2.2% (September 2025, $2.81 vs $2.75), +0.8% (June 2025, $2.58 vs $2.56). Consensus models this company extremely well, which is what one would expect of a business with flat revenue and a stable margin, and which means there is essentially no forecast edge available.
Corporate actions — a quiet record, and one governance item
Three 8-Ks are on file and the scan produces one substantive item.
The 2026-05-22 filing (Item 5.02) records a chief accounting officer transition: "On May 19, 2026, Randall J. Scheuneman, Vice President & Chief Accounting Officer and Principal Accounting Officer... notified the Company that he will retire from the Company effective March 1, 2027 and that he will be stepping down from his current role effective June 30, 2026... Mr. Scheuneman's planned retirement is not due to any disagreement with the Company on any matter relating to the Company's financial statements, internal control over financial reporting, operations, policies or practices." His successor is Matteo C. Pigozzo, age 55, in the role from 1 July 2026, previously Vice President and Corporate Controller, with the company since 2006 and before that eleven years at Deloitte. The explicit "not due to any disagreement" language is standard and the succession is internal and long-planned. It explains the five Form 3 rows in the insider file dated 2026-07-01.
The 2026-05-12 filing (Item 5.07) records the annual meeting: thirteen directors elected, say-on-pay approved, Deloitte & Touche ratified, and a non-binding stockholder proposal on directors failing to obtain a majority vote NOT approved.
The 2026-07-28 filing (Item 2.02) is the second-quarter earnings release. Exhibit 99.1 is not in the extracted text, so no management commentary or guidance is quoted anywhere in this dive. The 8-K body does confirm the company's own non-GAAP definitions, which are worth recording because this dive uses the same construction: "Free cash flow represents net cash provided by operating activities less additions to plant and equipment."
There is no spin-off, no segment realignment, no split, no notes offering and no large acquisition in the 8-K record. For a batch in which eleven of twelve names last time concealed a corporate action, a genuinely quiet filing record is worth stating.
2. Cash flow and the balance sheet
The capital-expenditure check: COULD NOT BE PERFORMED
This is the second name in this batch, after Williams, where the highest-yield check in the programme is unavailable, and the reason is worse here.
The manifest records "tables": false for all six Illinois Tool Works filings, and direct inspection confirms zero [TABLE] markers in the 10-K (265,993 characters) and zero in the 10-Q (84,347 characters). Searches for "Additions to plant and equipment" — the company's own line item, quoted in its 8-K non-GAAP definition — return no hits in either document. And the archive contains no June-quarter 10-Q at all: the two quarterly filings are dated 2025-10-24 (September 2025 quarter) and 2026-05-07 (March 2026 quarter).
Every figure below is vendor-sourced and unverified:
| FY2022 | FY2023 | FY2024 | FY2025 | Trailing (derived) | |
|---|---|---|---|---|---|
| Operating cash flow | $2,348M | $3,539M | $3,281M | $3,126M | ~$2,619M |
| Capital expenditure | $412M | $455M | $437M | $419M | ~$318M |
| Free cash flow | $1,936M | $3,084M | $2,844M | $2,707M | ~$2,300M |
| Capex ÷ D&A | 1.005x | 1.152x | 1.087x | 1.055x | 1.050x |
| FCF yield | — | — | — | 3.19% | 2.70% |
What can be said about the capex figure without a filing, and what cannot.
The diagnostic looks clean. capexToDepreciationTTM of 1.050 and a four-year band of 1.005x to 1.152x is exactly what an asset-light industrial with $419 million of capital expenditure on $16 billion of revenue should produce. There is no positive-sign error, no zero, no sub-15%-of-D&A signature and no 3x swing. None of the four documented corruption signatures fires.
But the trailing figures move in a way that would normally invite a filing check, and no filing is available to provide one. Trailing operating cash flow of approximately $2,619 million is 16.2% BELOW FY2025's $3,126 million, and trailing capital expenditure of approximately $318 million is 24.1% below FY2025's $419 million. A simultaneous decline in both, in a year when revenue grew 5.4% in the first half, is unusual. It may be working capital, timing, or a genuine reduction in capital intensity. We cannot tell from this file and we do not guess.
The honest statement: the capex field passes every automated screen and could not be confirmed against a filing. The free-cash-flow yield of 2.70% is quoted with that caveat attached, and it is the lowest in this batch.
The balance sheet, and the equity that has been bought away
| 2023-12-31 | 2024-12-31 | 2025-12-31 | |
|---|---|---|---|
| Cash | $1,065M | $948M | $851M |
| Goodwill | $4,909M | $4,839M | $5,098M |
| Intangible assets | $657M | $592M | $591M |
| Total assets | $15,518M | $15,067M | $16,148M |
| Short-term debt | $1,825M | $1,555M | $2,286M |
| Long-term debt | $6,339M | $6,308M | $6,683M |
| Total debt | $8,370M | $8,078M | $8,969M |
| Net debt | $7,305M | $7,130M | $8,118M |
| Total shareholders' equity | $3,012M | $3,316M | $3,225M |
| Treasury stock, at cost | ($23,870M) | ($25,375M) | ($26,875M) |
The treasury stock line is the story of this company's capital allocation in one number: $26,875 million of stock repurchased and held, against $3,225 million of remaining book equity and a $84,889 million market capitalisation.
The consequences for the ratio block are severe and are handled in Section 6. Equity of $3,225 million against $5,689 million of goodwill and intangibles gives tangible book value per share of MINUS $9.54; priceToBookRatioTTM reads 29.2x and returnOnEquityTTM reads 101.7%. Neither is a statement about the business. The measure this dive uses instead is return on invested capital, at 24.7%, which is excellent and is not an artefact.
Leverage is moderate and rising. Net debt of $8,118 million at 1.91x EBITDA, with interest coverage of 14.45x — comfortable. But total debt rose $891 million in FY2025 while equity fell $91 million, and short-term debt rose 47% from $1,555 million to $2,286 million. The buyback and the dividend together cost $3,285 million in FY2025 against free cash flow of $2,707 million; the $578 million gap was borrowed.
Capital return
| FY2022 | FY2023 | FY2024 | FY2025 | |
|---|---|---|---|---|
| Share repurchase | $1,750M | $1,500M | $1,500M | $1,500M |
| Dividends paid | $1,542M | $1,615M | $1,695M | $1,785M |
| Total | $3,292M | $3,115M | $3,195M | $3,285M |
| as % of current market cap | 3.9% | 3.7% | 3.8% | 3.9% |
The repurchase figure is exactly $1,500 million in three consecutive years. That is not an opportunistic programme responding to price; it is a policy. It is a defensible one — predictability has value — and it means the company bought the same dollar amount of stock at $241 as at $299. Combined shareholder yield is approximately 3.9%: a 2.18% dividend at a $6.44 trailing rate and 42.9% payout, plus roughly 1.77% of buyback.
3. Geography — an over-count of 152.9%, in the first year the home market appears
The seg_geo block for FY2025 sums to $24,524 million against revenue of $16,044 million — 152.9%.
| FY2025 line | Value |
|---|---|
| North America | $8,480M |
| United States | $7,395M |
| Other North America | $1,085M |
| Europe | $4,162M |
| Asia Pacific | $3,079M |
| South America | $323M |
| Sum as published | $24,524M |
inc_a revenue | $16,044M |
| Ratio | 152.9% |
The mechanism is exact and is the CDNS/CSX class: the block carries an AGGREGATE alongside its own components. United States $7,395M + Other North America $1,085M = $8,480M, which is the North America line to the dollar.
Removing the aggregate's components gives $8,480M + $4,162M + $3,079M + $323M = $16,044M — matching revenue exactly. So the underlying data is correct and the block is unusable as published.
Two further observations, and the second is the more interesting.
FY2024 and every prior year back to FY2016 contain only the four aggregates — North America, Europe, Asia Pacific, South America — and sum correctly to revenue. FY2024: $8,530M + $4,101M + $2,961M + $306M = $15,898M, exactly. The over-count is FY2025-specific and is caused by the ADDITION of two lines, not the loss of any.
And those added lines are the home market. FY2016 through FY2024 contain no United States line at all — the confirmed home-market-omission class that this programme has documented on NEM, WM and MAR. FY2025 fixes that omission and, in fixing it, breaks the sum. We record both: the geography block was defective in nine consecutive years for one reason and is defective in FY2025 for the opposite reason.
The corrected FY2025 picture is worth having and is used in this dive:
| Region | FY2025 | share of revenue |
|---|---|---|
| United States | $7,395M | 46.1% |
| Europe | $4,162M | 25.9% |
| Asia Pacific | $3,079M | 19.2% |
| Other North America | $1,085M | 6.8% |
| South America | $323M | 2.0% |
| Total | $16,044M | 100% |
53.9% of revenue is non-United States, which is corroborated by the 10-K's employment disclosure — approximately 16,000 of 43,000 employees in the United States, 37%. Europe at 25.9% is the largest single foreign exposure and Asia Pacific has grown from $2,935M in FY2023 to $3,079M, +4.9%, the fastest-growing region.
seg_prod, by contrast, is clean. FY2025 segments sum to $16,062M against inc_a revenue of $16,044M — an 0.11% difference attributable to intersegment elimination. No over-count of the MRSH class and no omission.
4. Valuation — priced in or room?
At $295.06 (market cap $84.889B, 287.7M shares):
| Trailing | FY2026E | FY2027E | FY2028E | |
|---|---|---|---|---|
| Consensus adjusted EPS | — | $11.412 (11) | $12.292 (12) | $13.049 (8) |
| Growth | — | +9.1% | +7.7% | +6.2% |
| P/E | 26.75x (GAAP diluted) | 25.9x | 24.0x | 22.6x |
| Revenue (consensus) | $16,044M (FY2025) | $16,806M (10) | $17,433M (11) | $17,979M (8) |
| Revenue growth | +0.9% | +4.8% | +3.7% | +3.1% |
| PEG on FY2027 | — | — | ~3.1 | — |
| EV / EBITDA | 20.2x | — | — | — |
| Free cash flow yield (unverified) | 2.70% | — | — | — |
| Dividend yield | 2.18% | — | — | — |
| Return on invested capital | 24.7% | — | — | — |
| Net debt / EBITDA | 1.91x | — | — | — |
| Price / book | 29.2x — ARTEFACT | — | — | — |
Estimate coverage is thin for a company this size. 11 analysts on FY2026 EPS, 12 on FY2027 — the anchor — and 8 on FY2028. FY2029 rests on 6 analysts and is excluded from every conclusion. The FY2027 range of $11.874 to $12.928 is an 8.9% spread — narrow, consistent with a highly predictable business.
est.epsAvg is verified against actuals. The FY2025 row's epsAvg of $10.456 against reported GAAP diluted EPS of $10.49 is a 0.3% difference. The field is sound.
est.ebitdaAvg and est.ebitAvg are REJECTED with the signature stated. In every year from FY2023 to FY2029, ebitdaAvg is exactly 32.71% of revenueAvg and ebitAvg is exactly 30.65%. Illinois Tool Works' actual FY2025 EBITDA margin on the vendor's own income statement was 28.98%. The fabricated ratio is 12.9% too high and is applied mechanically across seven years. All forward valuation uses epsAvg.
Enterprise value is broadly reliable here. enterpriseValueTTM of $93,744M against a market capitalisation of $84,889M implies $8,855M of net claims, against FY2025 net debt of $8,118M — a $737 million residual consistent with first-half 2026 borrowing. Noncontrolling interests are $1 million and are immaterial. evToEBITDATTM of 20.2x is quoted without correction, which makes ITW one of the few names in this batch whose enterprise value needed no repair.
4a. What today's price assumes (the inversion)
At $295.06 — 25.9x FY2026 consensus and 24.0x FY2027 — the price embeds:
- Revenue grows 4.8% in FY2026 and 3.7% in FY2027. (Consensus; 10 and 11 analysts.) Against a four-year actual of 0.7% cumulative. The first half of 2026 delivered 5.4%, which is genuinely supportive — but one half-year against three flat years is not yet a trend.
- Operating margin expands beyond 26.5%. (Our derivation.) Consensus EPS growth of 7.7% on revenue growth of 3.7% requires roughly 200 basis points of leverage plus the buyback. Margin has already risen 250 basis points in four years from 23.8% to 26.3%, and each further point comes from a smaller remaining tail.
- The buyback continues at $1,500 million a year. (Company practice; exactly repeated in FY2023, FY2024 and FY2025.) At roughly 1.77% of market capitalisation it contributes about two points of the EPS growth. It is currently funded partly by debt: buyback plus dividends of $3,285 million against free cash flow of $2,707 million in FY2025.
- The market keeps paying 22-26x forward earnings for a company growing revenue at 3.7%. (Our number.) This is the most fragile assumption in the price, and it is the one the sell side has already rejected: the consensus target of $280 implies 22.8x FY2027E, and the analyst HIGH of $301 implies 24.5x. The entire covering analyst community's most optimistic multiple is one half-turn above today's. At 20x FY2027E the stock is $246; at 26x it is $320.
- Nothing goes wrong in Automotive OEM. (Our derivation.) At $3,288 million, 20.5% of revenue, it is the largest segment and the one most exposed to global vehicle build rates, tariffs and platform transition. It grew 3.1% in FY2025.
4b. The return bridge (why the multiple moves)
Expected return over the next twelve months decomposes as: adjusted EPS growth (+7.7%, FY2026E $11.412 to FY2027E $12.292) + multiple drift (COMPRESSION, from 25.9x on today's forward year to roughly 22.5x on the then-forward year, approximately −13%) + shareholder yield (+3.9%) ≈ −1%.
Our base explicitly assumes the multiple compresses, and unlike most such assumptions in this programme it is shared by the people who cover the stock. The consensus target of $280 is 22.8x FY2027 consensus EPS. Ours is $270 at 22.0x. The difference between us and the street is 3.6% — we are not the outlier here; the price is.
The reason the multiple should compress is a single ratio. 24.0x forward earnings on 3.7% forecast revenue growth is a PEG of roughly 3.1 on the earnings line and far worse on the revenue line. Illinois Tool Works has earned a premium multiple for a very long time and deserves one — 24.7% return on invested capital and a 26.5% operating margin are not common. A premium multiple is not the same as this multiple, and the four-year revenue chart is the reason.
Note what would break our view: if the first half of 2026's 5.4% revenue growth proves to be a genuine inflection rather than a comparison effect, 24x is defensible and $336 becomes the base rather than the bull. The 2026-10-23 print is the first test.
At 20x FY2027E the price is $246 (−16.6%). At 26x it is $320 (+8.4%).
4c. Variant perception (where we differ, what would surprise)
- We have essentially no variant perception against the sell side, and that is itself the finding. Our base of $270 is 3.6% below the consensus target of $280, which is itself 5.1% below the market price. Nine of 28 analysts rate this a sell; only six rate it a buy; the consensus rating is "Hold". The professional community covering this stock is more negative on it than we are, and the stock is 1.5% below its 52-week high anyway. That configuration — a stock making new highs against a covering community with a below-market target and nine sells — is unusual and is the single most informative thing in this file. Under the house rule, a name where we have no variant perception defaults toward Hold, and that is exactly where this lands.
- We think the first-half revenue acceleration deserves more attention than the multiple debate. Revenue grew 6.1% in the June quarter and 5.4% in the half, after three years averaging 0.2%. If that is real, everything in this dive is too cautious. Watchable number: organic revenue growth in the 2026-10-23 release against a September 2025 base of $4,059 million. Above 5% for a second consecutive quarter and the growth score of 4 is wrong. At or below 3% and the June quarter was a comparison effect.
- We think the margin ceiling is closer than the consensus assumes. Operating margin has gone 23.8% → 25.1% → 26.8% → 26.3% → 26.5% trailing. The FY2024 to FY2025 step was NEGATIVE and the trailing figure is only 20 basis points above FY2025. Roughly two points of the consensus 7.7% FY2027 EPS growth needs margin. The margin engine may simply be finished.
- The knowledge base has NOTHING, and the void is the one this programme predicted. Zero entity matches in 52,021 for both ITW and Illinois Tool Works, and — worth recording separately — zero homograph noise on a three-letter ticker, a cleaner result than CEG, PWR, EMR, USB or MMM produced. The single free-text hit is
marko_papic(2020-08-27, conviction 75, speaker David Samra) on ABB, a Swiss-Swedish company, six years ago. Diversified industrials was already on the confirmed list of genuine sector voids and Illinois Tool Works confirms it. - Positive surprise that would force a re-rating: two consecutive quarters of organic revenue growth above 5%, which would make 24x a growth multiple; operating margin above 27.5%, which would show the 80/20 engine still has road; a meaningful acquisition — $107 million of acquisitions against $1,500 million of buyback in FY2025 is a statement that management sees nothing to buy, and a change would be significant; or Construction Products returning to growth after a 4.7% decline.
- Negative surprise that would break the thesis: revenue growth returning below 2%, confirming the four-year pattern; Automotive OEM declining as vehicle build rates or content per vehicle turn; operating margin below 26%; the buyback being cut from its exactly-$1,500-million policy while debt keeps rising; or a goodwill impairment against $5,689 million of goodwill and intangibles on $3,225 million of book equity.
Synthos fair values
All three anchors are multiples of the FY2027 consensus adjusted EPS distribution (mean $12.292, low $11.874, high $12.928; 12 analysts). Price-to-book is not usable as a cross-check because the ratio is an artefact; the cross-checks are the free-cash-flow yield and the dividend.
- Bear ~$214 — 18.0x the FY2027 consensus LOW of $11.874. Cross-check: 18.8x FY2026E; a 3.72% free-cash-flow yield; 3.0% above the 52-week low of $241.07... and in fact 11.2% BELOW it, which is stated rather than smoothed: this bear case requires a break below the twelve-month range. The scenario: revenue growth returns to zero, the margin engine stalls, Automotive OEM turns down with global vehicle production, and a diversified industrial with 3.35x debt-to-equity and no growth re-rates toward a market multiple. −27.5%.
- Base ~$270 — 22.0x the FY2027 consensus MEAN of $12.292. Cross-check: 23.7x FY2026E; 20.7x FY2028E; a 2.95% free-cash-flow yield; a 2.39% dividend yield. Sensitivity, stated openly: 21x gives $258 and 24x gives $295 — exactly today's price. The whole answer lives in a 21-24x band on one estimate row, and today's price sits at the top of it. The scenario: the first-half revenue acceleration proves partial, consensus earnings arrive, the buyback continues, and the multiple drifts back toward the level the sell side's own targets imply. −8.5%.
- Bull ~$336 — 26.0x the FY2027 consensus HIGH of $12.928. Cross-check: 25.7x FY2028E; 12.1% above the 52-week high of $299.60 and 11.6% above the highest analyst target on the street. The scenario: the 5.4% first-half revenue growth is a genuine inflection, operating margin passes 27.5%, and the market pays a full quality multiple for a 24.7%-return-on-invested-capital compounder that has started growing again. +13.9%.
Base is 8.5% BELOW spot; asymmetry roughly 0.51:1 (27.5% down, 13.9% up), before a shareholder yield of approximately 3.9%. That is the worst payoff ratio in this batch and it is a Hold. Note that the bull case requires a price 11.6% above the most optimistic target published by any of the 28 analysts covering the stock — which is the clearest way to express how much optimism the current price already contains.
5. Knowledge base — zero, and a predicted void confirmed
Raw entity hits: 0. Free-text hits: 1, about a different company. Name-level claims on Illinois Tool Works: 0.
The case-sensitive entity sweep ran ITW and Illinois Tool Works across all 52,021 distilled claims. It returned NOTHING.
Two things follow and both are worth recording.
First, there is no homograph contamination. The three-letter ticker ITW returned zero matches rather than noise. That is a materially cleaner result than the documented failures on CEG (26 of 29 matches were Constellation Software), PWR (Quanta Computer at conviction 85), EMR (whose only entity match was Emerson Collective, an unrelated LLC), USB (Universal Serial Bus) and MMM ("$3M" strings). A clean zero is a better outcome than a contaminated positive, and it is reported as such.
Second, the void is the one this programme had already identified. A free-text sweep on illinois tool, industrial conglomerate and diversified industrial returned exactly one hit:
> 2020-08-27 · bullish · conviction 75 · horizon: thesis · entities: ABB · categories: conglomerate breakup, value investing · channel: marko_papic · speaker: David Samra · role: independent
> "ABB (Swiss-Swedish industrial conglomerate, ~$55B cap) is undervalued; sum-of-parts plus new CEO improving operating profitability leaves ~10-15% upside toward a $60-65B valuation."
It concerns ABB, a different company on a different continent, and it is six years old. It is discarded.
Diversified industrials was already on the confirmed list of genuine sector voids in this store, alongside insurance brokerage and environmental services. Illinois Tool Works confirms it at the name level, and this dive reports the empty lane as empty rather than padding it with adjacent macro material.
Attribution note: the single free-text hit carries speaker: David Samra with speaker_role: independent. Under the standing rule that speaker_role is unreliable, the tag is noted rather than relied upon. No management voice appears. No concentration test is meaningful across zero name-level claims.
Conclusion. Breadth 0, claim count 0, net conviction none. The Synthos knowledge base has nothing to say about Illinois Tool Works. That absence is a real input to the verdict: a name at 24.0x forward earnings, trading above the street's own consensus target, with nine sell ratings and no independent expert support, is relying on the multiple alone.
6. Data integrity — what could not be checked, and what failed
Five findings. The dominant one is the absence of verifiable filings.
0. THE FILINGS ARE PROSE-ONLY AND THE JUNE-QUARTER 10-Q IS ABSENT — the capex check could not be performed. The manifest records "tables": false for all six filings, and direct inspection confirms zero [TABLE] markers in the 10-K (265,993 characters) and zero in the 10-Q (84,347 characters). Searches for "Additions to plant and equipment" — the company's own line item, quoted verbatim in its own 8-K non-GAAP definition — return no hits. Separately and additionally, the archive contains no June-quarter 10-Q: the two quarterly filings are dated 2025-10-24 (September 2025 quarter) and 2026-05-07 (March 2026 quarter), so the latest filing with financial statements in this archive is 2026-03-31. And the 2026-07-28 earnings-release 8-K carries no Exhibit 99.1 text. Consequence: not one June-quarter figure in this dive is filing-verified, and the highest-yield check in the programme is unavailable. This is stated in a banner at the top of the document rather than buried here.
1. capitalExpenditure — screens CLEAN, cannot be confirmed, and one trailing movement is worth flagging. capexToDepreciationTTM of 1.050, with a four-year band of 1.005x to 1.152x, trips none of the four documented corruption signatures: no positive sign, no zero, no sub-15%-of-D&A reading, no 3x swing. On the evidence available the field is sound. The item that would ordinarily prompt a filing check and cannot get one: trailing operating cash flow of approximately $2,619 million is 16.2% below FY2025's $3,126 million and trailing capital expenditure of approximately $318 million is 24.1% below FY2025's $419 million — a simultaneous decline in both, in a half-year when revenue grew 5.4%. The trailing free-cash-flow yield of 2.70% is quoted with that caveat and is the lowest in this batch.
2. seg_geo FY2025 sums to 152.9% of revenue — REJECTED as published, rebuilt, and used. The block carries a North America aggregate of $8,480M alongside its own two components, United States $7,395M and Other North America $1,085M, which sum to $8,480M exactly. This is the CDNS/CSX over-count class in its purest form. Removing the components gives $16,044M, matching revenue to the dollar. Two further findings: FY2016 through FY2024 contain NO United States line at all — nine consecutive years of the NEM / WM / MAR home-market omission — and FY2025 fixes that omission and in doing so breaks the sum. The block is therefore defective in every year in the file, for opposite reasons. The rebuilt FY2025 split — United States 46.1%, Europe 25.9%, Asia Pacific 19.2%, Other North America 6.8%, South America 2.0% — is used, and is corroborated by the 10-K's disclosure that approximately 16,000 of 43,000 employees (37%) are US-based.
3. priceToBookRatioTTM, returnOnEquityTTM and tangibleBookValuePerShareTTM are arithmetically correct and analytically void — NOT USED. Book value per share is $10.13 against a $295.06 price, giving 29.2x book; return on equity reads 101.7%; tangible book value per share is NEGATIVE $9.54. All three follow from $26,875 million of treasury stock against $3,225 million of remaining equity and $5,689 million of goodwill and intangibles. This is the MAR negative-equity class in its milder, still-positive-book form, and the mechanism is shown rather than the numbers quoted as findings. debtToEquityRatioTTM of 3.35x and financialLeverageRatioTTM of 5.70x are similarly distorted; the measures used in this dive are net debt to EBITDA (1.91x), interest coverage (14.45x) and return on invested capital (24.7%).
4. est.ebitdaAvg and est.ebitAvg carry a fixed-ratio fabrication signature — REJECTED. In every year from FY2023 to FY2029, ebitdaAvg is exactly 32.71% of revenueAvg and ebitAvg is exactly 30.65%. Illinois Tool Works' actual FY2025 EBITDA margin was 28.98%. The fabricated ratio is 12.9% too high. All forward valuation uses epsAvg, which is verified: FY2025's $10.456 against a reported diluted $10.49, a 0.3% match.
Also worth recording, and three of these are clean verifications: seg_prod ties — FY2025 segments sum to $16,062M against inc_a revenue of $16,044M, an 0.11% difference attributable to intersegment elimination, with no over-count of the MRSH class and no omission; enterpriseValueTTM needed NO repair — $93,744M against a market capitalisation of $84,889M implies $8,855M of net claims against FY2025 net debt of $8,118M, a residual consistent with first-half borrowing, and noncontrolling interests are $1 million, so the NCI class that distorts KKR, MPC, FCX and Cummins is immaterial here; est.epsAvg is verified against actuals; and the share count — 287.7 million implied by market capitalisation ÷ price against 287.0 million diluted in the June quarter, a 0.2% difference.
One presentational flag. inc_q reports depreciationAndAmortization of ZERO for the June 2026 quarter and $18M for March 2026, against roughly $100M in each of the four preceding quarters. A quarterly D&A of zero for a company with $2,524 million of net property, plant and equipment is not a real number. It does not affect any conclusion in this dive — the annual series is intact at $392-427 million and EBITDA is not used — but it is the same field family that produces the capexToDepreciationTTM diagnostic, and it is flagged.
Non-equity tripwire — checked and passed. ITW is common stock, NYSE-listed. Price of $295.06 is not par-like; beta is 1.011; the dividend is a declared and repeatedly raised quarterly rate; volume was 1.15M shares (~$340M of turnover); the 52-week band of $241.07 to $299.60 is a 24% range. No preferred stock is outstanding; noncontrolling interests are $1 million. This is common equity.
Vendor composite rating — noted, and half-discredited. B / 3 overall, with 5 on return on equity and 1 on both debt-to-equity and price-to-book. All three of those sub-scores are computed on the treasury-stock-distorted equity base rejected in finding 3 — a "5" for a 101.7% return on equity that is an artefact, and a "1" for a price-to-book that carries no information. Three of six sub-scores are built on numbers this dive rejects. The composite is not used.
7. Technicals
- Price $295.06. −1.52% from the 52-week high of $299.60 — the smallest gap in this batch; +22.40% above the low of $241.07. Position within the annual range: 92nd percentile — the highest in this batch.
- Far above both moving averages: +10.5% above a 50-day of $267.11; +12.4% above a 200-day of $262.56, with the 50-day above the 200-day and both rising.
- RSI 67.1 — firm and approaching overbought. MACD +6.71.
- Maximum drawdown from peak over the trailing year: −1.52% — effectively none. This stock has not had a meaningful drawdown in twelve months, which is remarkable for an industrial with 20.5% of revenue in Automotive OEM.
- Relative performance: 3-month +17.25% against SPY +7.59% and QQQ +7.67% — ten points of outperformance in one quarter; 6-month +11.68% against SPY +11.09% — in line; 12-month +16.94% against SPY +24.26% and QQQ +30.80% — seven and fourteen points behind. Like Sherwin-Williams in this batch, the entire twelve-month return arrived in the last quarter.
Today's move and what it does to the entry
ITW closed 2026-08-04 at $295.06, up 2.28% or $6.57 from $288.49. It opened at $284.92 — below the previous close — traded $284.36 to $296.33, and closed within 0.4% of the day high on 1.15 million shares. A 4.2% intraday range with a close at the high is a strong session. No company-specific filing is dated 2026-08-04; the last event was the 2026-07-28 earnings release, seven days earlier.
The honest read: this is the most expensive entry in this batch relative to the street's own view of the name. 92nd percentile of the annual range, 10.5% above the 50-day average, essentially no drawdown in twelve months, at 24.0x forward consensus — and the consensus price target is $280, below the price, with nine sells. There is no discount, no valuation cushion, no knowledge-base support and no analyst enthusiasm. A holder should keep holding a genuinely excellent business. A buyer is being asked to pay more than any covering analyst thinks it is worth.
8. Insiders — one open-market purchase, and it is the only one in this batch
| Date | Person | Role | Type | Shares | Price | Held after |
|---|---|---|---|---|---|---|
| 2026-06-02 | Jennifer F. Scanlon | director | P-PURCHASE | 806 | $247.99 | 1,652 |
| 2026-05-08 | Ernest Scott Santi | director | A-Award | 1,883 | $254.76 | 266,128 |
| 2026-05-08 | Jaime A. Irick | director | A-Award | 765 | $254.76 | 2,286 |
| 2026-07-01 | Matteo C. Pigozzo | VP & Chief Accounting Officer | (Form 3) | — | — | 3,669.4 |
| 2026-07-01 | Matteo C. Pigozzo | VP & Chief Accounting Officer | (Form 3) | — | — | 1,097 |
| 2026-07-01 | Matteo C. Pigozzo | VP & Chief Accounting Officer | (Form 3) | 556.3 | $255.75 | 0 |
| 2026-07-01 | Matteo C. Pigozzo | VP & Chief Accounting Officer | (Form 3) | 559.1 | $258.11 | 0 |
| 2026-07-01 | Matteo C. Pigozzo | VP & Chief Accounting Officer | (Form 3) | 537.1 | $299.60 | 0 |
Five of the eight rows are Form 3 initial statements of beneficial ownership by Matteo C. Pigozzo, appointed Vice President and Chief Accounting Officer effective 1 July 2026 per the 8-K filed 2026-05-22 — an initial disclosure of existing holdings across several award tranches, not transactions.
Two are routine director stock awards on 8 May 2026, the date of the annual meeting. Note that Ernest Scott Santi — the company's previous chief executive, now a director — holds 266,128 shares, worth approximately $78.5 million at today's price. A former chief executive with a $78 million position still on the board is a meaningful alignment datum.
And one is a genuine open-market purchase. Jennifer F. Scanlon, a director, bought 806 shares at $247.99 on 2 June 2026, taking her holding from 846 to 1,652 — a 95% increase. The amount is small, approximately $200,000, and the direction is unambiguous: this is the only open-market insider PURCHASE in any of the twelve names in this batch.
How much weight it carries, stated honestly: not much, and more than nothing. The sum is trivial relative to the company and relative to Santi's holding. But it was executed at $247.99 — 16.0% below today's price — by a director who chose to increase her personal stake by 95% at a moment when nine sell-side analysts rated the stock a sell. There is not one open-market sale in the file. On a name where the sell side's consensus target is below the market price, an insider buying at a price 16% lower is a small counterweight and is recorded as one.
9. Verdict, kill-criteria and flip conditions
Hold.
The business deserves the first paragraph. Illinois Tool Works produces $16 billion of revenue with 43,000 employees — $373,000 per employee — across seven segments none of which exceeds 20.5% of revenue, at a 26.5% trailing operating margin and a 24.7% return on invested capital, with 14.45x interest coverage and 1.91x net leverage. It converts roughly $2.7 billion a year to free cash flow on $419 million of capital expenditure and returns approximately $3.3 billion — 3.9% of the market capitalisation — every year. The 80/20 operating discipline lifted operating margin 250 basis points, from 23.8% to 26.3%, across four years in which revenue did not grow. That is a superb operating system and we are not disputing any part of it.
The price is the entire objection, and for once we are not alone in it.
First, the arithmetic. At $295.06 the shares are 25.9x the FY2026 consensus of $11.41 and 24.0x FY2027's $12.29, on forecast revenue growth of 4.8% and 3.7% — a PEG of roughly 3.1, the highest in this batch. Revenue was $15,932 million in FY2022 and $16,044 million in FY2025.
Second, and unusually, the sell side agrees with us more emphatically than we do. The consensus price target is $280 — 5.1% BELOW the current price. The highest target published by any of the 28 covering analysts is $301, 2.0% above. Nine analysts rate the stock SELL against six BUY, and the consensus rating is "Hold". A stock trading 1.5% below its 52-week high, above its own consensus target, with nine sells, is a configuration worth pausing over. Our base of $270 is 3.6% below the street's target — we are marginally more negative, and the substantive disagreement is between the market and its own analysts, not between us and them.
Third, the payoff is 0.51:1 — base $270 (−8.5%), bear $214 (−27.5%), bull $336 (+13.9%). The worst in this batch. And the bull case requires a price 11.6% above the most optimistic target on the street.
Fourth, there is nothing underneath. Zero knowledge-base claims in 52,021. No drawdown to buy — the maximum drawdown from peak over twelve months is 1.52%. And the file could not be verified: prose-only filings, no June-quarter 10-Q, and no capex check.
The honest counterweights, and there are three. The June quarter was genuinely good — revenue +6.1%, operating income +7.4%, EPS +10.1%, the best two consecutive quarters in three years — and if that is an inflection rather than a comparison effect, this dive is too cautious and $336 becomes the base. A director bought stock in the open market at $247.99, the only insider purchase in any of the twelve names in this batch. And the former chief executive still holds 266,128 shares.
Pre-registered BUY trigger — what would make this Buy — Tactical:
- A price at or below approximately $240 with the FY2027 consensus of $12.29 intact — 19.5x FY2027E, roughly the 52-week low and near the level at which a director bought in June, restoring approximately 2.2:1 asymmetry against the $214 bear and the $336 bull.
- Or, at any reasonable price, two consecutive quarters of organic revenue growth above 5% with operating margin above 27% — which would convert this from a quality premium into a growth multiple and would make the four-year flat-revenue objection obsolete.
Pre-registered KILL criteria — what would take this to Avoid:
- Revenue growth returning below 2% in any quarter, confirming that the first half of 2026 was a comparison effect.
- Operating margin below 26%, indicating the 80/20 engine has run out of tail to prune.
- Automotive OEM revenue declining year on year — the largest segment at 20.5% of revenue and the one most exposed to global vehicle production.
- The $1,500 million annual buyback being cut while total debt continues rising; it contributes roughly two of the seven points of consensus EPS growth and is already partly debt-funded.
- A goodwill or intangible impairment of any size against $5,689 million of goodwill and intangibles on $3,225 million of book equity.
- Construction Products declining a second consecutive year after −4.7% in FY2025.
Where ITW fits in the Synthos Framework Portfolio. No position today. Tracked on the industrials watch list at the $240 buy trigger above. Sizing note: if the trigger is hit this is a core-quality holding rather than a tactical one — a 24.7%-return-on-invested-capital business with a repeatable operating method is exactly the kind of asset worth waiting for, which is precisely why the discipline about entry price matters more here than on a name where the thesis has a clock on it. Logged as a tracked Synthos call (Hold) as of 2026-08-04 at $295.06, with the fair-value anchors, the buy trigger, the kill criteria and the 4a assumptions all gradeable. Also logged as a DATA flag: this name's filing archive is prose-only AND missing the June-quarter 10-Q, so the capital-expenditure check remains outstanding and should be run at the next refresh.
Single biggest risk: multiple compression on a business that has not grown revenue since 2022. At 24.0x FY2027 consensus with 3.7% forecast revenue growth, every point of forward multiple is $12.29 per share, 4.2% of the price. A move from 24.0x to 20x — not a crisis, simply the multiple the sell side's own consensus target already implies plus a little — is $49 per share, 16.6%. The company's answer to flat revenue has been margin and buyback, and both have limits: operating margin has already risen 250 basis points and went backwards from FY2024 to FY2025, and the $1,500 million repurchase plus $1,785 million of dividends exceeded FY2025 free cash flow of $2,707 million by $578 million, which was borrowed. Nothing about this company is deteriorating. A great deal of optimism sits in this price, and the twenty-eight analysts who follow it professionally have a consensus target 5.1% below where it trades.
Provenance & disclosures
- Traceability: ZERO name-level knowledge-base claims name Illinois Tool Works out of 52,021 distilled claims. The case-sensitive entity sweep on ITW and Illinois Tool Works returned nothing, and — recorded separately because it is a favourable result — the three-letter ticker produced ZERO homograph noise, a cleaner outcome than CEG (26 of 29 matches were Constellation Software), PWR (Quanta Computer at conviction 85), EMR (whose only entity match was Emerson Collective), USB (Universal Serial Bus) or MMM ("$3M" strings). A free-text sweep on "illinois tool", "industrial conglomerate" and "diversified industrial" returned ONE hit and it concerns a different company: marko_papic, 2020-08-27, conviction 75,
speaker: David Samra,speaker_role: independent, entity ABB — "ABB (Swiss-Swedish industrial conglomerate, ~$55B cap) is undervalued; sum-of-parts plus new CEO improving operating profitability leaves ~10-15% upside toward a $60-65B valuation." Six years old, wrong company, discarded. (raw entity hits 0, free-text hits 1, name-level 0, discarded 1; breadth 0, claim count 0, net conviction none). Diversified industrials was already on the confirmed list of genuine sector voids in this store, alongside insurance brokerage and environmental services, and Illinois Tool Works confirms it at the name level. Under the standing rule thatspeaker_roleis unreliable, the "independent" tag is noted rather than relied upon. No management voice appears. No concentration test is meaningful across zero name-level claims. The quote is verbatim from the stored claim text. - Data as-of: fundamentals — vendor-sourced and UNVERIFIED for the reason in the next bullet, covering quarterly income data through 2026-06-30 and annual balance-sheet and cash-flow data through 2025-12-31; narrative disclosures (the chief accounting officer transition, the annual meeting results, the employment split and the company's own free-cash-flow definition) filing-verified from the 8-Ks filed 2026-05-12, 2026-05-22 and 2026-07-28 and the 10-K filed 2026-02-13 · estimates 2026-08-04 · prices 2026-08-04, quote timestamp 1785873603 = 2026-08-04T20:00:03Z ($295.06, +2.28%; 50-DMA $267.11; 200-DMA $262.56; RSI 67.1; MACD +6.71; beta 1.011) · knowledge-base claims 2026-08-04. Illinois Tool Works' fiscal year is the calendar year. All figures come from the Synthos vendor data file for ITW or from the SEC filings in the ITW archive; no figure comes from memory, recall or external retrieval.
- FILING EXTRACTION LIMITATION — stated prominently because it caps the confidence of this entire document, and it is worse here than on any other name in this batch: the manifest records
"tables": falsefor all six filings, and direct inspection confirms ZERO[TABLE]markers in the 10-K (265,993 characters) and ZERO in the 10-Q (84,347 characters) — no income statement, balance sheet or cash-flow statement survived extraction, and searches for the company's own "Additions to plant and equipment" line return no hits. SEPARATELY AND ADDITIONALLY, the archive contains NO JUNE-QUARTER 10-Q: the two quarterly filings present are dated 2025-10-24 (September 2025 quarter) and 2026-05-07 (March 2026 quarter), so the latest filing with financial statements in this archive is 2026-03-31. And the 2026-07-28 earnings-release 8-K carries no Exhibit 99.1 text. The capital-expenditure check — the highest-yield check in this programme, which fires on roughly four files in ten — therefore COULD NOT BE PERFORMED, and NOT ONE June-quarter figure in this dive is filing-verified. - Filing archive contents: 10-K filed 2026-02-13 (fiscal 2025 — the source of the 43,000-employee and 16,000-US-employee disclosure); 10-Q filed 2025-10-24 (September 2025 quarter); 10-Q filed 2026-05-07 (March 2026 quarter — the source of the OBBBA tax note and the 20.6% first-quarter effective tax rate); 8-K filed 2026-05-12 (Item 5.07 — 2026 annual meeting: thirteen directors elected, say-on-pay approved, Deloitte & Touche ratified, and a non-binding stockholder proposal on directors failing to obtain a majority vote NOT approved); 8-K filed 2026-05-22 (Item 5.02 — Randall J. Scheuneman retiring as VP & Chief Accounting Officer effective 2026-06-30 and from the company effective 2027-03-01, explicitly "not due to any disagreement"; Matteo C. Pigozzo, 55, VP & Corporate Controller and with the company since 2006, succeeding effective 2026-07-01); 8-K filed 2026-07-28 (Item 2.02 second-quarter earnings release; Exhibit 99.1 NOT in the extracted text, though the body confirms the company defines free cash flow as "net cash provided by operating activities less additions to plant and equipment"). None carries preserved table data. Because no earnings-release exhibit is present, no management guidance is quoted anywhere in this dive.
- Where the vendor could not be checked, and where it failed on its own internal evidence (detailed in Section 6): the capex check could not be completed for the reason above, though the
capexToDepreciationTTMdiagnostic of 1.050 and a four-year band of 1.005x-1.152x trip none of the four documented corruption signatures — while trailing operating cash flow of approximately $2,619M sits 16.2% below FY2025's $3,126M and trailing capex of approximately $318M sits 24.1% below FY2025's $419M, a simultaneous decline that would ordinarily prompt a filing check and cannot get one;seg_geoFY2025, which sums to 152.9% of revenue because a North America aggregate of $8,480M is carried alongside its own components United States $7,395M and Other North America $1,085M (which sum to $8,480M exactly) — the CDNS/CSX over-count class — while FY2016 through FY2024 contain NO United States line at all, nine consecutive years of the NEM / WM / MAR home-market omission, so the block is defective in every year in the file for opposite reasons;priceToBookRatioTTM(29.2x),returnOnEquityTTM(101.7%),tangibleBookValuePerShareTTM(−$9.54),debtToEquityRatioTTM(3.35x) andfinancialLeverageRatioTTM(5.70x), all void because $26,875M of treasury stock has reduced book equity to $3,225M against $5,689M of goodwill and intangibles — the MAR class in its milder form, with the mechanism shown rather than the numbers quoted;est.ebitdaAvg/ebitAvg, rejected for a fixed-ratio fabrication signature (exactly 32.71% and 30.65% ofrevenueAvgin every year FY2023-FY2029) against an actual FY2025 EBITDA margin of 28.98%; andinc_qdepreciationAndAmortizationof ZERO for the June 2026 quarter and $18M for March 2026 against roughly $100M in each preceding quarter — not a real number for a company with $2,524M of net property, plant and equipment, flagged though it affects no conclusion here. Where vendor and filing or internal arithmetic AGREED — recorded, because clean verifications are real findings:seg_prodties (FY2025 segments summing to $16,062M againstinc_arevenue of $16,044M, an 0.11% intersegment difference — no over-count, no omission);enterpriseValueTTMneeded NO repair ($93,744M implying $8,855M of net claims against FY2025 net debt of $8,118M, with noncontrolling interests of $1 million making the NCI omission class immaterial here — one of the few enterprise values in this batch requiring no correction);est.epsAvg(FY2025 $10.456 against a reported diluted $10.49, a 0.3% match); and the share count (287.7M implied by market capitalisation ÷ price against 287.0M diluted in the June quarter). - Basis note: consensus
epsAvgand the earnings-calendar actuals appear to be on a basis very close to GAAP for this company — the FY2025epsAvgof $10.456 against reported GAAP diluted EPS of $10.49 is a 0.3% difference, and the June 2026 calendar actual of $2.84 matches the vendor'sinc_qdiluted EPS exactly. Forward multiples and the trailing multiple of 26.75x are therefore directly comparable, which is unusual in this batch and is stated. One historical caveat: FY2024's reported diluted EPS of $11.71 contains a non-operating item — the September 2024 quarter shows pre-tax income of $1,362M against operating income of $1,052M, a $310M gap — so the FY2025 "decline" to $10.49 is measured against an inflated base. - Estimate coverage: 11 analysts on FY2026 EPS, 12 on FY2027 — the anchor for all three fair values, with a range of $11.874 to $12.928 (8.9%) — and 8 on FY2028. FY2029 rests on SIX analysts and is excluded from every conclusion. Revenue coverage is 10, 11 and 8. Against 28 analysts issuing ratings, EPS coverage of 11-12 is thin and is stated as such.
- Peer note: the vendor peer set — AMETEK, Cummins, Canadian Pacific Kansas City, CSX, Emerson Electric, Howmet Aerospace, Johnson Controls, Roper Technologies, TransDigm and Thomson Reuters — contains two railroads and a financial-data company. AMETEK, Emerson and Roper are reasonable diversified-industrial comparables; Dover, Parker Hannifin and Eaton are absent. Note that Cummins is also in this batch and is analysed separately. No peer-multiple comparison is drawn.
- Price-target note — and this is the most informative single item in the file:
ptreportstargetHigh$301,targetLow$254,targetConsensus$280 andtargetMedian$280.5 — a genuine four-point distribution, and the consensus is 5.1% BELOW the spot price of $295.06 while the analyst HIGH is only 2.0% above it.gradesreports 0 strong buy, 6 buy, 13 hold and 9 SELL across 28 analysts, with a consensus rating of "Hold" — the most bearish sell-side distribution in this batch by a wide margin. A stock trading 1.52% below its 52-week high, above its own consensus target, with nine sell ratings, is an unusual configuration and this dive treats it as a substantive input rather than a curiosity. Separately,quote.yearHigh/yearLow($303.16/$238.82) disagree withtech.hi52/lo52($299.60/$241.07) by 1.2% and 0.9%;techis used throughout. - Fair-value caveat: the $214 / $270 / $336 anchors are multiples of the FY2027 consensus adjusted EPS distribution — 18.0x the low of $11.874, 22.0x the mean of $12.292, and 26.0x the high of $12.928 — cross-checked against the unverified free-cash-flow yield (3.72%, 2.95% and 2.37%) and the dividend. Price-to-book is NOT available as a cross-check because the ratio is an artefact of $26,875M of treasury stock, and that is stated rather than substituted with a proxy. Stated arithmetic, not a discounted cash flow. The base is sensitivity-disclosed: 21x gives $258 and 24x gives $295 — exactly today's price. The whole answer lives in a 21-24x band on one estimate row and the market currently sits at the top of it. Note also that the bull case of $336 is 11.6% ABOVE the highest analyst target published on this name, which is the clearest available measure of how much optimism the current price contains.
- Timing: second-quarter 2026 results were released 2026-07-28, seven days before this dive, and beat the consensus adjusted EPS estimate by 1.8% ($2.84 against $2.79) on revenue 2.7% above estimate — but the corresponding 10-Q is NOT in this archive and no June-quarter figure is filing-verified. The next print is 2026-10-23, 80 days away (consensus adjusted EPS $2.97, revenue $4,243M). The most recent insider filings are dated 2026-07-01 and are Form 3 initial statements by the incoming chief accounting officer; the only substantive transaction in the file is an open-market PURCHASE of 806 shares at $247.99 by director Jennifer F. Scanlon on 2026-06-02 — the only insider purchase in any of the twelve names in this batch. 2026-08-04 carried no company-specific filing.
- Accessibility note: no information in this dive is conveyed by colour. All emphasis is carried by bold text, table structure and explicit labelling.
- Not investment advice. Independent research, educational and informational only, never personalised. No recommendation to buy, sell or hold any security is made to any person.
- Version: 2026-08-04-full.