Illinois Tool Works Inc. (NYSE:ITW) stock rose 0.79% (As on August 2, 11:53:32 AM UTC-4, Source: Google Finance) after the company posted mixed result for the second quarter of FY 23. Operating income grew nine percent to a record $1.01 billion. Operating margin of 24.8 percent improved 170 basis points as enterprise initiatives contributed 130 basis points. Operating cash flow was $790 million, and free cash flow was $705 million, an increase of 68 percent, with a conversion rate to net income of 94 percent. The company repurchased $375 million of its own shares and the effective tax rate was 21.4 percent. By geography, North America was flat, Europe grew 5%, Asia Pacific grew 11%, with China up 22%. Food equipment also delivered strong organic growth of 7% with North America up 8%. Institutional end markets were up 13%, with continued strength across the board. International revenue grew 5%, with Europe up 5%, and Asia Pacific up 2%. The service revenue grew 16%, the ninth quarter in a row with double-digit growth as the company continues to support existing customers, new product installations, and gain market share. Test and measurement and electronics delivered positive organic growth of 1%. The slowdown in semiconductor-related revenues, which represent about 20% of the segment, reduced the segment growth rate by 6 percentage points. Polymers and fluids organic revenue was down 1% against a difficult comparison of plus 10% last year.

ITW in the second quarter of FY 23 has reported the adjusted earnings per share of $2.41, beating the analysts’ estimates for the adjusted earnings per share of $2.39. The company had reported the adjusted revenue growth of 2 percent to $4.07 billion in the second quarter of FY 23, missing the analysts’ estimates for revenue of $4.13 billion.

Illinois Tool Works expects FY 2023 EPS to be in the range of $9.55-$9.95 versus the analyst consensus of $9.68. The company is projecting organic growth of three to five percent based on first half 2023 performance and current levels of demand. Divestitures are expected to reduce revenue by one percent resulting in total revenue growth of two to four percent. Operating margin is projected to be in the range of 24.5 to 25.5 percent, with enterprise initiatives contributing more than 100 basis points. Free cash flow is projected to be greater than 100 percent of net income and the company plans to repurchase approximately $1.5 billion of its own shares.