Analysis of Profitability Ratios
Quarterly Data
Profitability ratios measure the company ability to generate profitable sales from its resources (assets).
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Profitability Ratios (Summary)
Illinois Tool Works Inc., profitability ratios (quarterly data)
Based on: 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31), 10-K (reporting date: 2018-12-31), 10-Q (reporting date: 2018-09-30), 10-Q (reporting date: 2018-06-30), 10-Q (reporting date: 2018-03-31).
The financial data reveals several important trends in profitability and efficiency over the analyzed quarters.
- Gross profit margin
- The gross profit margin remained relatively stable over the period, fluctuating narrowly around the low 41% range. From early 2018 to the end of 2019, it consistently hovered near 41.8%, with a slight dip in mid-2020 followed by a minor recovery in 2021. This consistency suggests stable cost control in production or cost of goods sold relative to revenue.
- Operating profit margin
- The operating profit margin exhibited a modest downward trend starting in early 2020, declining from roughly 24.1% at the end of 2019 to a low of approximately 22.5% in mid-2020. By 2021, the margin showed signs of recovery, climbing back up to just under 25%. This pattern may indicate increased operating expenses or other operational challenges during 2020, with improvements thereafter.
- Net profit margin
- Net profit margin demonstrates a notable increase starting in late 2018, climbing from around 12.5% in early 2018 to peaks near 19% by mid and late 2021. While there was a slight dip in late 2020, overall net profitability showed robust improvement, indicating effective management of overall costs, tax impacts, and other non-operational factors enhancing bottom-line performance.
- Return on equity (ROE)
- ROE experienced significant growth, rising sharply from about 43% in early 2018 to values exceeding 80% during 2019. It reached a peak above 109% in early 2020, followed by a gradual decline during 2020 into 2021 but remained convincingly high above 60%. The elevated ROE levels suggest strong value generation for shareholders, possibly driven by higher net income and efficient equity use, though the later decline signals some challenges in sustaining this elevated profitability.
- Return on assets (ROA)
- ROA followed a pattern analogous to ROE, steadily increasing from roughly 11% in early 2018 to a peak near 17.6% in early 2020. A decline ensued thereafter, bottoming near 13.5% in late 2020, but rebounding toward 17.5% in 2021. This indicates improving asset utilization to generate earnings until 2020, with some setbacks likely linked to external factors during the pandemic period, and subsequent recovery in asset efficiency.
In summary, the company demonstrated strong and generally improving profitability metrics through 2019 into early 2020, with some impact visible on operating and net margins during 2020, possibly due to broader economic or operational disruptions. However, most metrics showed resilience and recovery in 2021, with sustained high returns on equity and assets signaling effective management and operational performance over the medium term.
Return on Sales
Return on Investment
Gross Profit Margin
Illinois Tool Works Inc., gross profit margin calculation (quarterly data)
| Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | Dec 31, 2018 | Sep 30, 2018 | Jun 30, 2018 | Mar 31, 2018 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||||||||||||||||
| Gross profit | |||||||||||||||||||||
| Operating revenue | |||||||||||||||||||||
| Profitability Ratio | |||||||||||||||||||||
| Gross profit margin1 | |||||||||||||||||||||
| Benchmarks | |||||||||||||||||||||
| Gross Profit Margin, Competitors2 | |||||||||||||||||||||
| Boeing Co. | |||||||||||||||||||||
| Caterpillar Inc. | |||||||||||||||||||||
| Eaton Corp. plc | |||||||||||||||||||||
| GE Aerospace | |||||||||||||||||||||
| Honeywell International Inc. | |||||||||||||||||||||
| Lockheed Martin Corp. | |||||||||||||||||||||
| RTX Corp. | |||||||||||||||||||||
Based on: 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31), 10-K (reporting date: 2018-12-31), 10-Q (reporting date: 2018-09-30), 10-Q (reporting date: 2018-06-30), 10-Q (reporting date: 2018-03-31).
1 Q4 2021 Calculation
Gross profit margin = 100
× (Gross profitQ4 2021
+ Gross profitQ3 2021
+ Gross profitQ2 2021
+ Gross profitQ1 2021)
÷ (Operating revenueQ4 2021
+ Operating revenueQ3 2021
+ Operating revenueQ2 2021
+ Operating revenueQ1 2021)
= 100 × ( + + + )
÷ ( + + + )
=
2 Click competitor name to see calculations.
- Revenue Trends
- The operating revenue exhibits a fluctuating pattern over the analyzed periods. Initially, revenue values remained relatively stable through 2018 and 2019, ranging from approximately $3.5 billion to $3.8 billion each quarter. A significant decline is observed in the first half of 2020, with revenue dropping to around $2.56 billion in Q2 2020, likely reflecting external economic challenges. Following this low, a recovery trend is apparent, with revenue increasing back above $3.3 billion by Q4 2020 and continuing to rise through 2021, nearing pre-2020 levels.
- Gross Profit Analysis
- Gross profit similarly follows the revenue trend, maintaining a generally stable level around $1.48 to $1.6 billion in 2018 and 2019. A notable dip occurs in early 2020, with gross profit decreasing to $970 million in Q2 2020. Subsequently, the gross profit recovers steadily, reaching approximately $1.5 billion by the end of 2021. This pattern indicates sensitivity of gross profit to changes in revenue but also reflects resilience through a recovery phase.
- Gross Profit Margin Stability
- The gross profit margin percentage remains relatively stable throughout the entire period, fluctuating narrowly between approximately 41.1% and 42.1%. Even during periods of decreased revenue and gross profit in early 2020, the margin only slightly declined, suggesting effective cost control and pricing strategies that maintained profitability ratios amid revenue volatility.
- Overall Insights
- The data reveal a consistent financial structure with gross profit margins remaining steady despite fluctuations in revenue and gross profit amounts. The significant downturn experienced in early 2020 aligns with global economic disruptions; however, the company demonstrated recovery in both top-line and gross profit in subsequent quarters. The stability of the gross profit margin throughout suggests operational efficiency and the ability to manage expenses relative to revenue changes effectively.
Operating Profit Margin
Illinois Tool Works Inc., operating profit margin calculation (quarterly data)
| Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | Dec 31, 2018 | Sep 30, 2018 | Jun 30, 2018 | Mar 31, 2018 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||||||||||||||||
| Operating income | |||||||||||||||||||||
| Operating revenue | |||||||||||||||||||||
| Profitability Ratio | |||||||||||||||||||||
| Operating profit margin1 | |||||||||||||||||||||
| Benchmarks | |||||||||||||||||||||
| Operating Profit Margin, Competitors2 | |||||||||||||||||||||
| Boeing Co. | |||||||||||||||||||||
| Caterpillar Inc. | |||||||||||||||||||||
| Eaton Corp. plc | |||||||||||||||||||||
| GE Aerospace | |||||||||||||||||||||
| Honeywell International Inc. | |||||||||||||||||||||
| Lockheed Martin Corp. | |||||||||||||||||||||
| RTX Corp. | |||||||||||||||||||||
Based on: 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31), 10-K (reporting date: 2018-12-31), 10-Q (reporting date: 2018-09-30), 10-Q (reporting date: 2018-06-30), 10-Q (reporting date: 2018-03-31).
1 Q4 2021 Calculation
Operating profit margin = 100
× (Operating incomeQ4 2021
+ Operating incomeQ3 2021
+ Operating incomeQ2 2021
+ Operating incomeQ1 2021)
÷ (Operating revenueQ4 2021
+ Operating revenueQ3 2021
+ Operating revenueQ2 2021
+ Operating revenueQ1 2021)
= 100 × ( + + + )
÷ ( + + + )
=
2 Click competitor name to see calculations.
Over the analyzed periods, the company experienced fluctuations in key financial metrics including operating income, operating revenue, and operating profit margin. The trends reveal the impact of varying business conditions across quarters from 2018 through 2021.
- Operating Income
- The operating income showed a generally stable pattern in 2018 and 2019, with quarterly values fluctuating between approximately $824 million and $932 million. A notable decline occurred in 2020, particularly in the second quarter, where operating income dropped sharply to $449 million, reflecting a significant decrease likely due to unfavorable external factors. This was followed by a recovery in the latter half of 2020, with operating income rebounding to $883 million by the fourth quarter. In 2021, operating income remained relatively steady, ranging between $834 million and $905 million, indicating stabilization after the 2020 downturn.
- Operating Revenue
- Operating revenue mirrored a somewhat similar trajectory to operating income. Revenue figures in 2018 and 2019 hovered around $3.5 billion to $3.8 billion per quarter. However, the first half of 2020 saw a marked decline, dropping to a low of $2.56 billion in the second quarter, signifying a considerable contraction in sales or overall demand. The latter half of 2020 experienced a gradual growth back to $3.47 billion by the year-end. Throughout 2021, operating revenue showed signs of recovery and improvement, fluctuating around $3.5 billion to $3.7 billion, approaching pre-2020 levels.
- Operating Profit Margin
- The operating profit margin remained relatively consistent through 2018 and 2019, generally around 24.1% to 24.6%. In 2020, the margin decreased to a range of about 22.46% to 22.92%, reflecting the profitability impact associated with the revenue and income declines during that period. The margin showed signs of improvement in 2021, reaching as high as 24.78% in the second quarter, and stabilizing around 24% by the end of the year. This suggests efforts to improve operational efficiency or manage costs more effectively despite earlier challenges.
In summary, the financial data indicates that the company faced a significant downturn around early 2020, substantially affecting both income and revenue. This period was followed by a recovery phase through 2020 and into 2021, with profitability margins gradually returning to prior levels. The trends imply resilience and adaptability in operational performance in response to market disruptions.
Net Profit Margin
Illinois Tool Works Inc., net profit margin calculation (quarterly data)
| Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | Dec 31, 2018 | Sep 30, 2018 | Jun 30, 2018 | Mar 31, 2018 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||||||||||||||||
| Net income | |||||||||||||||||||||
| Operating revenue | |||||||||||||||||||||
| Profitability Ratio | |||||||||||||||||||||
| Net profit margin1 | |||||||||||||||||||||
| Benchmarks | |||||||||||||||||||||
| Net Profit Margin, Competitors2 | |||||||||||||||||||||
| Boeing Co. | |||||||||||||||||||||
| Caterpillar Inc. | |||||||||||||||||||||
| Eaton Corp. plc | |||||||||||||||||||||
| GE Aerospace | |||||||||||||||||||||
| Honeywell International Inc. | |||||||||||||||||||||
| Lockheed Martin Corp. | |||||||||||||||||||||
| RTX Corp. | |||||||||||||||||||||
Based on: 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31), 10-K (reporting date: 2018-12-31), 10-Q (reporting date: 2018-09-30), 10-Q (reporting date: 2018-06-30), 10-Q (reporting date: 2018-03-31).
1 Q4 2021 Calculation
Net profit margin = 100
× (Net incomeQ4 2021
+ Net incomeQ3 2021
+ Net incomeQ2 2021
+ Net incomeQ1 2021)
÷ (Operating revenueQ4 2021
+ Operating revenueQ3 2021
+ Operating revenueQ2 2021
+ Operating revenueQ1 2021)
= 100 × ( + + + )
÷ ( + + + )
=
2 Click competitor name to see calculations.
The analysis of the quarterly financial data reveals several trends in profitability, revenue, and margin performance over the periods considered.
- Net Income
- Net income exhibited some fluctuations throughout the period but generally remained relatively stable from 2018 into early 2019, with values mostly around the 600 million US dollar mark. A notable decline occurred in the second quarter of 2020, where net income dropped sharply to 319 million US dollars, reflecting a significant impact during that period. However, recovery was evident in the subsequent quarters of 2020 and into 2021, with net income increasing back to levels between approximately 600 to 775 million US dollars by the end of 2021.
- Operating Revenue
- Operating revenue followed a similar pattern, showing stability in 2018 and the first quarter of 2019, with revenues generally in the 3500 to 3800 million US dollar range. Beginning in the first quarter of 2020, revenue dropped substantially, hitting the lowest point in the second quarter of 2020 at 2564 million US dollars. This decline was likely related to external pressures during that period. A recovery trend followed, with revenues climbing back near pre-decline levels by the end of 2021, fluctuating around the 3500 to 3700 million US dollar range.
- Net Profit Margin
- The net profit margin demonstrated an increasing trend over the timeframe analyzed. It started at around 12.3% in early 2018 and showed a marked increase to between approximately 17% and 18% through 2019. Although there was some variability during 2020, including a slight dip in the margin, the ratio rose again in 2021 to reach peaks above 19% in the middle of the year before slightly moderating at the end of 2021. This suggests improved operational efficiency or cost management despite the revenue fluctuations.
Return on Equity (ROE)
Illinois Tool Works Inc., ROE calculation (quarterly data)
| Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | Dec 31, 2018 | Sep 30, 2018 | Jun 30, 2018 | Mar 31, 2018 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||||||||||||||||
| Net income | |||||||||||||||||||||
| Stockholders’ equity attributable to ITW | |||||||||||||||||||||
| Profitability Ratio | |||||||||||||||||||||
| ROE1 | |||||||||||||||||||||
| Benchmarks | |||||||||||||||||||||
| ROE, Competitors2 | |||||||||||||||||||||
| Boeing Co. | |||||||||||||||||||||
| Caterpillar Inc. | |||||||||||||||||||||
| Eaton Corp. plc | |||||||||||||||||||||
| GE Aerospace | |||||||||||||||||||||
| Honeywell International Inc. | |||||||||||||||||||||
| Lockheed Martin Corp. | |||||||||||||||||||||
| RTX Corp. | |||||||||||||||||||||
Based on: 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31), 10-K (reporting date: 2018-12-31), 10-Q (reporting date: 2018-09-30), 10-Q (reporting date: 2018-06-30), 10-Q (reporting date: 2018-03-31).
1 Q4 2021 Calculation
ROE = 100
× (Net incomeQ4 2021
+ Net incomeQ3 2021
+ Net incomeQ2 2021
+ Net incomeQ1 2021)
÷ Stockholders’ equity attributable to ITW
= 100 × ( + + + )
÷ =
2 Click competitor name to see calculations.
The financial performance over the analyzed quarters exhibits several notable trends with respect to net income, stockholders’ equity attributable to the company, and return on equity (ROE).
- Net Income
- Net income shows a relatively stable pattern initially, ranging between 600 and 670 million US dollars in the periods from March 2018 through December 2019. Starting in the first quarter of 2020, there is a significant decline in net income to 566 million, with a sharp drop to 319 million in the second quarter of 2020, likely reflecting an adverse external impact during that period. Subsequently, net income recovers steadily, reaching a peak of 775 million in the second quarter of 2021 before decreasing somewhat toward the end of 2021.
- Stockholders’ Equity Attributable to the Company
- This metric depicts a declining trend from March 2018 to September 2019, falling from 4,159 million to 2,966 million US dollars. This decline continues into early 2020, reaching a low point of 2,283 million in March 2020. However, after this trough, equity begins a sustained recovery, increasing steadily through to December 2021, where it reaches 3,625 million US dollars. This overall pattern indicates some financial pressure prior to 2020, followed by a rebuilding of equity capital through 2021.
- Return on Equity (ROE)
- The ROE exhibits a generally increasing pattern from 43.35% in March 2018 to extremely high values above 80% during most of 2019, peaking above 109% in the first quarter of 2020. The spike in ROE occurs despite the noted declines in net income and equity during the same period, suggesting a significant decrease in equity relative to net income that amplified the ROE ratio. Following this peak, ROE decreases through 2020, then recovers and stabilizes in the mid-to-high 70% range by the end of 2021.
Overall, the data indicates that the company experienced a period of shrinking equity and volatile net income leading up to and during early 2020, likely influenced by external market disruptions. Despite these challenges, net income and equity recovered thereafter, supported by a robust return on equity that remained significantly elevated compared to the earliest observations. This implies improved capital efficiency but also highlights volatility that may deserve further investigation.
Return on Assets (ROA)
Illinois Tool Works Inc., ROA calculation (quarterly data)
| Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | Dec 31, 2018 | Sep 30, 2018 | Jun 30, 2018 | Mar 31, 2018 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||||||||||||||||
| Net income | |||||||||||||||||||||
| Total assets | |||||||||||||||||||||
| Profitability Ratio | |||||||||||||||||||||
| ROA1 | |||||||||||||||||||||
| Benchmarks | |||||||||||||||||||||
| ROA, Competitors2 | |||||||||||||||||||||
| Boeing Co. | |||||||||||||||||||||
| Caterpillar Inc. | |||||||||||||||||||||
| Eaton Corp. plc | |||||||||||||||||||||
| GE Aerospace | |||||||||||||||||||||
| Honeywell International Inc. | |||||||||||||||||||||
| Lockheed Martin Corp. | |||||||||||||||||||||
| RTX Corp. | |||||||||||||||||||||
Based on: 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-09-30), 10-Q (reporting date: 2021-06-30), 10-Q (reporting date: 2021-03-31), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-30), 10-Q (reporting date: 2020-06-30), 10-Q (reporting date: 2020-03-31), 10-K (reporting date: 2019-12-31), 10-Q (reporting date: 2019-09-30), 10-Q (reporting date: 2019-06-30), 10-Q (reporting date: 2019-03-31), 10-K (reporting date: 2018-12-31), 10-Q (reporting date: 2018-09-30), 10-Q (reporting date: 2018-06-30), 10-Q (reporting date: 2018-03-31).
1 Q4 2021 Calculation
ROA = 100
× (Net incomeQ4 2021
+ Net incomeQ3 2021
+ Net incomeQ2 2021
+ Net incomeQ1 2021)
÷ Total assets
= 100 × ( + + + )
÷ =
2 Click competitor name to see calculations.
- Net Income Trends
- The net income exhibited moderate fluctuations over the observed periods. Starting at 652 million USD in the first quarter of 2018, it increased slightly to 666 million USD mid-year before trending downwards to 607 million USD by the end of 2018. Throughout 2019, net income remained relatively stable, hovering between 597 million to 660 million USD. However, in 2020, a notable dip occurred, particularly in the second quarter (319 million USD), likely indicative of external disruptions, but it rebounded strongly by year-end to 642 million USD. During 2021, net income showed a growth trend, peaking in the second quarter at 775 million USD before slightly declining toward the end of the year.
- Total Assets Trends
- Total assets showed a general decline from 16,163 million USD in the first quarter of 2018 to a low of approximately 14,149 million USD in early 2020. After this trough, assets began to recover steadily throughout 2020 and into 2021, reaching 16,077 million USD by the end of 2021. This pattern suggests an initial contraction in asset base followed by a phase of growth and asset accumulation.
- Return on Assets (ROA) Trends
- ROA maintained a generally high level throughout the period, starting at 11.16% in early 2018 and showing a rising trend through to the end of 2018, peaking at 17.24%. In 2019, the ratio stabilized around the mid to high 16% range. In 2020, the ROA demonstrated some volatility, peaking at 17.6% in the first quarter before gradually declining to 13.51% by the fourth quarter. In 2021, ROA increased again, reaching a high of 17.57% in the third quarter and maintaining a strong level through the year-end.
- Insights and Interpretations
- The dip in net income and total assets in 2020 aligns with a period of external disruption affecting financial performance and asset base. However, the rebound in both net income and total assets in subsequent quarters suggests effective recovery and operational resilience. The consistently high ROA across the periods indicates efficient management of assets to generate earnings. The increases in ROA during certain quarters of 2021 highlight improved profitability and asset utilization in the recovery phase.