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Date

April 30, 2026, 10 a.m. ET

Call participants

  • Chairman & Chief Executive Officer — Christopher A. O’Herlihy
  • Senior Vice President & Chief Financial Officer — Michael M. Larsen
  • Vice President, Investor Relations — Erin Linnihan

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Takeaways

  • Revenue growth -- Total revenue grew 4.6%, with organic growth of 0.4%, a 3.9% contribution from currency, and 0.3% from acquisition.
  • GAAP EPS -- Increased 12% to $2.66, reflecting disciplined operational execution.
  • Operating margin -- Expanded by 60 basis points to 25.4%, driven by 120 basis points of Enterprise Initiatives contribution.
  • Free cash flow -- Increased 6%, with a 69% conversion rate in the quarter.
  • Share repurchases -- $375 million of stock repurchased in the quarter.
  • Guidance -- Full-year GAAP EPS guidance raised by $0.10 to a new midpoint of $11.30, representing 8% growth; operating margin expected to expand about 100 basis points to 26.5%-27.5%.
  • Organic growth outlook -- Annual projection maintained at 1%-3%; all seven segments projected to deliver positive organic growth and margin expansion.
  • Test & Measurement and Electronics segment -- Segment revenue rose 10%; organic growth was 5%, with Electronics up 10% and semi-related businesses gaining over 15%.
  • Welding segment -- Revenue increased 7% with 6% organic growth; operating margin reached 32.1%.
  • Food Equipment segment -- Overall revenue up 2%, with organic revenue down 3%; Service grew 3%, and Equipment fell 6%.
  • Automotive OEM segment -- Revenue grew 4%, with organic revenue down 1%; operating margin improved by 170 basis points to 21%.
  • Polymers & Fluids segment -- Revenue grew 5%, organic growth 2%, and operating margin expanded 150 basis points to 28%.
  • Construction Products segment -- Revenue up 3%; North America flat, Europe down 3%, Australia/New Zealand down 2%.
  • Specialty Products segment -- Revenue declined 1% and organic revenue dropped 5%, mainly due to PLS activities and delayed Middle East sales; operating margin expanded by 40 basis points to 31.3%.
  • Enterprise Initiatives -- Added 120 basis points to Q1 margin; expected to contribute 100 basis points to full-year margin improvement independent of volume.
  • CBI (Customer-Backed Innovation) -- "We are positioning the company to consistently deliver 3% plus CBI contribution to revenue by 2030," according to O’Herlihy; recent patent filings rose 9% in 2025 and are increasing further in 2026.
  • Order activity -- CapEx and semi-related segments reported "order rates that are meaningfully higher than the organic growth rates."
  • EPS timing -- Full-year expected EPS split is 48% in the first half and 52% in the second half, less back-end loaded than prior guidance.
  • Free cash flow guidance -- Management expects conversion to exceed 100% of net income for the year.
  • Share repurchase plan -- On track to repurchase about $1.5 billion of shares during 2026.
  • Automotive builds -- North American region down 5%, Europe flat, and China down 3%, but China meaningfully outperformed the broader auto market decline of 10% there.
  • Middle East sales impact -- Delayed sales and annual Middle East sales of about $100 million reduced organic growth by one percentage point.
  • Incremental margins -- Delivered approximately 40% in the quarter; projection for full-year incrementals in the mid- to high-40% range remains unchanged.
  • Price/cost impact -- Management stated "price/cost will be modestly accretive to margins after factoring in recent tariff changes and all known material cost increases."

Summary

Management reported that CapEx-driven segments—including Test & Measurement, Electronics, and Welding—are experiencing strong demand, with sustained order momentum extending into the second quarter. Guidance for organic growth, EPS, and operating margin was reaffirmed, with EPS guidance raised due to improved tax rate assumptions and first-quarter outperformance. Company leaders pointed out a sequential improvement in operating margins and organic growth is expected from the first to the second quarter, with positive trends continuing across all seven segments. Management highlighted that order rates in CapEx and semiconductor-related businesses are "meaningfully higher" than posted organic growth, and this is not yet reflected in current guidance. The company expects free cash flow conversion above 100% of net income, and plans to repurchase $1.5 billion in shares this year.

  • Management emphasized that improvement in Food Equipment and Specialty Products segments is forecasted as delayed sales and institutional headwinds subside in coming periods.
  • O’Herlihy stated, "all seven segments are projected to deliver positive organic growth and margin expansion in 2026," confirming broad-based operational confidence.
  • Christopher A. O’Herlihy said, "patent filings continue to be a very strong leading indicator of CBI," linking customer-backed innovation activities with future growth potential.
  • Company leadership disclosed that "call, always starts out a little lower, and then margins and incrementals improve sequentially," reinforcing expected progression for the year.

Industry glossary

  • CBI (Customer-Backed Innovation): Program aimed at driving organic revenue growth through new products and solutions directly informed by customer needs and feedback, tracked via metrics such as CBI yield and patent filings.
  • PLS (Product Line Simplification): Strategic activity to streamline offerings by eliminating low-value or non-core product lines to improve operational efficiency and margin profile.
  • Incremental margin: The proportion of additional operating profit generated from each additional unit of revenue, indicating operational leverage efficiency in the period.

Full Conference Call Transcript

Christopher A. O’Herlihy: Thank you, Erin, and good morning, everyone. As you saw in our press release this morning, Illinois Tool Works Inc. delivered a solid start to the year with results that were in line with our expectations. 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, we expanded operating margin by 60 basis points to 25.4%. We continue 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 Illinois Tool Works Inc. team executed at a high level on the profit drivers within our control. Our Enterprise Initiatives contributed 120 basis points to the bottom line, driving that 60 basis point overall margin improvement. We were equally encouraged by our continued progress on Illinois Tool Works Inc.’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 have 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. 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 have said before, Illinois Tool Works Inc.’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 will now turn the call over to Michael to provide more detail on the quarter and our guidance for 2026. Michael?

Michael M. Larsen: Thank you, Chris, and good morning, everyone. In Q1, the Illinois Tool Works Inc. 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, or 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 Illinois Tool Works Inc.'s total annual sales. 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 operating 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. 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 four for a brief update on our Enterprise Initiatives. Since 2012, our strong execution on the Enterprise Initiatives has been the most impactful driver of margin improvement at Illinois Tool Works Inc. 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.

Looking ahead, we expect these initiatives to continue to drive meaningful gains through 2030 as we track toward our 30% margin goal. Now let us 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. China declined 3%, but significantly outperformed automotive builds, which were down 10%. 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 200 to 300 basis points of outperformance versus builds, which are now expected to be down approximately 2% for the full year. Operating margin improved by 170 basis points to 21%. 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%. 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, and at the Food Equipment segment level, we continue to expect positive organic growth and margin improvement for the full year. 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 three years as the green shoots we talked about last quarter begin to look more like a sustainable recovery.

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 in annual revenues or about 15% of the segment, grew more than 15%. Looking ahead, market indicators like increasing fab utilization, encouraging customer signals, strong response to new products, as well as strong order activity all support the view that the positive demand trends that we are 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%. Equipment grew 8% with a strong contribution from new products. North America was the primary growth engine, up 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 plus 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 plus 6%, and Fluids was also flat. Operating margin expanded 150 basis points to 28%. 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%. 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 us turn to slide eight for an update on our guidance. As we have said before, Illinois Tool Works Inc. is well positioned to deliver meaningful progress on both the top and bottom line 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/cost 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%, 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 first and second half 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, and we are on track to repurchase approximately $1.5 billion of our shares in 2026. In summary, we are 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, Illinois Tool Works Inc. is well positioned to deliver on our guidance, including solid organic growth with best-in-class margins and returns.

And with that, Erin, I will turn it back to you.

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

Operator: Thank you. At this time, I would like to remind everyone, to ask a question, press star, then the number one on your telephone keypad. Your first question comes from the line of Andrew Alec Kaplowitz with Citigroup. Your line is open. Close enough. How is everyone doing?

Christopher A. O’Herlihy: Good morning. Good morning.

Andrew Alec Kaplowitz: Good morning. I know it is 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 and Welding are trending ahead of your expectations? Maybe consumer and Specialty, I guess, and Food Equipment was more institutional or a little below, and they just kind of net out. How are you thinking about growth by segment versus your original expectations?

Christopher A. O’Herlihy: Yes. So, Andy, as we have indicated, we expect all seven segments to show positive organic growth this year. I think you have characterized the first quarter pretty well. What we saw is those CapEx-related segments like Test & Measurement and Welding, with Test & Measurement, obviously in semiconductors and Electronics, as Michael indicated, grew more than 15%. And I would say with continued order strength here in Q2. Welding, it has been a tough environment for a few years. We grew 6% in Q1, a mixture of strong order activity that again continues into Q2 and continued improvement in CBI. And I think encouraging on Welding, the strength was pretty broad-based.

It was not just in industrial markets, which we started seeing in Q4, but it also, in Q1, bled into the commercial platforms as well. So certainly on those CapEx-related markets, strong order activity. And then on the more challenged consumer-facing markets, even though they are challenged, we continue to outgrow those markets. If we look at Automotive as a prime example where we again demonstrated a couple of hundred basis points of improvement over the market, similarly in Construction and even in areas like Polymers & Fluids, where in automotive aftermarket we showed a very healthy growth rate versus retail point of sales in automotive aftermarket. So I think it is a tale of two markets right now.

We are seeing the industrial CapEx markets very strong with great order activity. But even in those consumer-facing markets, which are improving a little bit, we are outgrowing those markets.

Andrew Alec Kaplowitz: It is helpful, Chris. And maybe a similar question on margin for you or Michael. You reiterated the incrementals for the year in the mid- to high-40s. Are you getting there at all differently? Because I mean, Test & Measurement and Auto look good, but Food Equipment obviously was lower. Was that just lower absorption in the quarter and it gets better from here? Are you seeing increased inflation impact you at all? How do you think about that?

Michael M. Larsen: Yes. I think, Andy, overall, the incremental margin assumptions and the operating margin assumptions are unchanged from what we were when we gave guidance on our last call. We continue to expect incrementals in the mid- to high-40s, and we expect to improve operating margins by 100 basis points this year. 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, that we will see some increased operating leverage as we go through Q1 to Q2 and into the back half of the year.

So overall, the margin expectations, as Chris said, are 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 would say certainly an anomaly in that segment in terms of the margin performance and the incrementals in the first quarter. It is 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 Food Equipment, as well as in that particular end market, as we went through February, March, and April. But it is certainly something we will continue to keep a close eye on. I would just add while we are on margins that while some of the more growth-challenged businesses that Chris 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.

Andrew Alec Kaplowitz: Very helpful.

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

Jamie Lyn Cook: Hi. Good morning. I guess this is my first question, can you just help us understand, last quarter it sounds like you were pretty positive on short-cycle momentum, things improving, your confidence level today with some of the uncertainty related to the war with Iran and macro and whether you saw any change in the cadence of sales throughout the quarter or into April? And then my second question, can you just give us an update on CBI, the contribution expected for 2026, and whether you are contemplating other parts of the portfolio that were having a harder time with CBI so perhaps there are opportunities to refocus to certain product lines which are being more successful versus not?

Thank you.

Michael M. Larsen: Thank you, Jamie. Maybe I will take the first part and then hand it over to Chris for the CBI question. In terms of overall confidence, let us start with the context that we came in right along with our plan for the first quarter. We talked 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. So I would say if anything, we are more confident today as we sit here. I think it is important to mention that our guidance today is based on the current levels of demand that we are seeing in these businesses.

In some of these businesses, maybe Welding and Test & 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 and the first quarter. That is not included in our guidance today. Again, based on our past practice, this is based on current run rates. And while there may be a little bit more of a challenge in 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.

And like I said, we are more confident in our organic growth guidance of 1% to 3% today than we were on the last call. One last word on Automotive: automotive did have a slower start in China. Automotive builds in China were down 10% in Q1, and they are projected to be flat in Q2. So we are expecting a pretty meaningful ramp from Q1 to Q2 with sequential growth in the low- to mid-single digits. We expect meaningful sequential margin improvement of about 100 basis points, and we expect incremental margins to improve.

If you look at the cadence that we outlined—you have the EPS split 48/52—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. And as we sit here today, we feel very, very confident in our ability to deliver both Q2 and the full year.

Christopher A. O’Herlihy: And then, Jamie, on your question on CBI and the opportunity profile, CBI can look a little different segment to segment, division to division. What I would say is that we have strong momentum right across the company on CBI, and we are really encouraged by the progress that we are making in every segment. We continue to see increasing strength in our pipeline of new products. It is one of the reasons why even in some of these slower growth markets we are outperforming those markets. We have had several successful new product launches this year across the portfolio. I would call out segments like Welding, Test & Measurement, Food Equipment, and Automotive.

We delivered a 40 basis points CBI yield improvement in 2025, and based on what we see in Q1, we are tracking really well to deliver incremental improvement in 2026 on the path to 3% plus by 2030, if not before. Patent filings continue to be strong—up 18% in 2024, 9% in 2025—and we see additional increases in 2026. As we have said before, patent filings continue to be a very strong leading indicator of CBI at Illinois Tool Works Inc., given the customer-backed nature of our innovation, which means that more often than not, patent filings are there to protect important customer solutions. Increased patent activity is often pretty well correlated to future revenue growth.

So we feel very positive about the engagement, enthusiasm, and followership around CBI, and we are now starting to see this come through in patent filings and yield. Thank you.

Operator: Your next question comes from the line of Tami Zakaria with J.P. Morgan.

Tami Zakaria: Hi. Good morning. Thank you so much. I have one question, and it is rather longer-term. 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—but just longer term, is GLP-1 on your radar as you plan for this segment over the coming few years?

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

Michael M. Larsen: And I would just add, we have said before Food Equipment is one of the most fertile segments from an innovation standpoint. There is 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.

Tami Zakaria: Understood. Thank you.

Michael M. Larsen: Mhmm.

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

Michael M. Larsen: Hi. Good morning, everybody. I was going to stick with Food as well because that comment kind of caught my attention. Do you think that market is actually turning? Or is there something that you are doing that is kind of Illinois Tool Works Inc.-specific there? I will leave it there.

Christopher A. O’Herlihy: I think it is hard to say the market is turning, Steve. I do think that we have some interesting innovations going on in that space. As Michael mentioned, the Food Equipment space is very effective from an innovation standpoint. We have new product launches in all product categories in 2026, really driven around critical customer pain points like energy, water, and labor savings, and all those trends are very relevant in QSR. I am pretty sure that a large part of our QSR growth is coming from innovation.

Michael M. Larsen: And I would just add that we always talk about the strength of the Service business. While QSR, in particular, can be a little bit lumpy, the Service business is more of an annuity-type business. Our ability to put up 3%, 4%, 5% organic growth on a consistent basis at attractive margins kind of buffers some of that lumpiness that you might see in the businesses that you are talking about.

Stephen Edward Volkmann: Got it. Okay. Thank you for that. And then, Michael, it sounded like there was a margin thing that happened in the quarter that was very specific. Should we assume 2Q is kind of back to normal?

Michael M. Larsen: Yes. I think there is really nothing unusual about Q1, other than the slow start maybe in Food Equipment. If you look at how the quarter progressed, January started out a little bit slower because of Food Equipment, and then we improved from a growth standpoint in February and got even better in March. I think March organic was up 4%, and in April we are off to a really good start with organic growth. If you look at our full year guidance range of 1% to 3%, we are probably trending towards the high end of that range here in April. On margins, we expect a sequential improvement from Q1 to Q2. We just did 25.4%.

We would expect more than 100 basis points of improvement sequentially from Q1 to Q2, so that would put it somewhere around 26.5%, and further improvement into Q3 on margins and as well in Q4. From a growth standpoint, from Q2 to Q3, revenues based on run rates again are about the same in Q3 and Q4. 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. Hopefully, that gives you a little bit of context.

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

Michael M. Larsen: Sure.

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

Julian C.H. Mitchell: Hi. Good morning. Good morning. Michael, sorry, there are a couple of other calls going on. But just to clarify your comment on the top line just now, were you referring to total company there in terms of the confidence of getting to the higher end of the range? Obviously, we had some questions on you were just over flat in Q1, and you have got 2% pegged at the midpoint for the year, and you tend to just guide with run rate, as you say. Is there anything happening on price later in the year that comes in because of cost inflation that gets the growth moving up?

Michael M. Larsen: I think, Julian, as we have said before, the first quarter was right in line with our plan. The organic growth rate was as we described it on the last earnings call, and how the year is projected to unfold is based on our typical seasonality. In terms of price, since you asked, we had a plan assumption going into the year around price as well as price/cost. Given some of the inflationary pressures that we are seeing, just like everybody else, our 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 and then carry forward into Q3 and Q4.

So I think it is fair to say there might be a little bit more 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 changed relative to our guidance other than, as we said, we have seen some really positive demand trends in two segments in particular.

Julian C.H. Mitchell: That is helpful. Thank you. And when we are looking at the operating margin guidance, you are off to a good start versus that 70 basis points or so acceleration that is guided for margins at the midpoint for the year as a whole. If we are thinking about some of the margins that were weakest—I think Food Equipment you have dealt with already—anything in Welding that we should think about over the balance of the year, the margins there perhaps picking up steam? And company-wide, is operating leverage fairly steady as you move through 2026?

Michael M. Larsen: 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. And then we would expect sequential improvement to those margins again in every segment in Q3 and into Q4. As you mentioned Welding specifically, those are best-in-class operating margins by a fair margin. So you would expect to see less improvement in the segments that have margins at or above 30%. You should expect to see a lot more improvement in places like Test & Measurement.

There is a little bit of impact from some recent acquisition activity, but as volume and price begin to pick up as we go through the year, you are going to see some really solid operating leverage in the Test & Measurement business as well.

Christopher A. O’Herlihy: Julian, I would just add that we have really good line of sight on at least 100 basis points of improvement with our Enterprise Initiatives.

Andrew Alec Kaplowitz: That is helpful. Thank you.

Operator: Your next question comes from the line of Bank of America.

Analyst: Morning. Look, I think you have been very clear on expecting improvements in organic growth into the second quarter, calling out specifically for the Food Equipment segment. That is a positive. How about the Specialty Products segment?

Michael M. Larsen: Yes. I think there was a little bit of an impact from the Middle East—kind of delayed sales in the aerospace business—which is sitting on significant orders and backlog. Those sales have been delayed. That and the combination of PLS efforts that are somewhat front-end loaded this year reduced the overall organic growth rate by three points in Specialty in the first quarter. We would expect that growth rate in Specialty to improve from here. I would say the equipment businesses in Specialty are performing very well, and then 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. So it is really all those factors offsetting each other. As we said, we expect the Specialty business to deliver positive organic growth this year and meaningful margin improvement based on what we are seeing in the businesses that make up Specialty as we sit here today. Thank you.

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

Christopher A. O’Herlihy: With respect to tariff recovery, given our “produce where we sell” philosophy, the direct impact of tariffs was largely mitigated at Illinois Tool Works Inc., and 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 is on our radar, I would say, and we certainly do not have anything in our guidance for it.

Analyst: Sure.

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