GLENVIEW, Ill. — Illinois Tool Works Inc. on Tuesday reported its first quarter 2022 results.
“In what remains a challenging and dynamic environment, our ITW business teams around the world continue to do an exceptional job of leveraging the performance power of the ITW Business Model and our advantaged supply position to support our customers and execute our ‘Win the Recovery’ strategy to accelerate profitable market penetration and organic growth across our portfolio,” said E. Scott Santi, chairman and CEO. “Our first quarter results reflect continued strong momentum in this regard, and we remain well-positioned to seize the opportunities and respond to the challenges that lie ahead as we move through the balance of 2022.”
First quarter revenue grew 11.2% to $3.9 billion with organic growth of 10.6%. The acquisition of MTS contributed 2.8% to revenue. Foreign currency translation impact reduced revenue by 2.2%.
Six of seven segments delivered positive organic growth, led by Food Equipment up 28%, Construction Products up 21%, Welding and Polymers & Fluids both up 13%, Test & Measurement and Electronics up 8%, and Specialty Products up 1%. Organic revenue was down 1% in Automotive OEM due to automotive production limitations related to component supply shortages.
GAAP EPS was $2.11, including $(0.05) of unfavorable foreign currency translation impact. Operating margin was 23.4%, excluding 70 basis points of margin dilution impact from the acquisition of MTS. Enterprise initiatives contributed 90 basis points. While pricing actions more than offset raw material cost increases on a dollar-for-dollar basis, the impact of price/cost reduced margin percentage by 250 basis points.
Operating cash flow was $323 million, and free cash flow was $249 million with a conversion of 38% of net income due to higher working capital investments to support double digit revenue growth and increased inventory levels to help mitigate supply chain risk and sustain customer service levels. The company repurchased $375 million of its own shares, and the effective tax rate for the quarter was 23.1%.
Based on the company’s first quarter results and projecting current levels of demand through the balance of the year, ITW is raising its full-year organic growth guidance to 7% to 10% and full-year revenue growth guidance to 8.5% to 11.5%. The acquisition of MTS is expected to add 3% to revenue. Foreign currency translation is expected to reduce revenue by 1.5%.
The company is also raising its full-year GAAP EPS guidance to $9.00 to $9.40 per share, an increase of 11% to 16% versus prior year excluding the impact of favorable one-time tax items in 2021. Operating margin is expected to expand to 24% to 25%, with enterprise initiatives contributing 100 basis points. The margin dilution impact from the acquisition of MTS and price/cost are expected to be 50 and 100 basis points, respectively. Free cash flow is expected to grow 10% to 20% year-over-year with a conversion rate of 85% to 95% of net income. The company is on pace to repurchase $1.5 billion of its own shares, and the effective tax rate is expected to be 23% to 24%.