ITW, Stanley Black & Decker Executives Don’t See a Second-Half Spending Bounce

So, another quarter of “not yet.”

Those looking for encouraging language from industrial spending bellwethers Illinois Tool Works Inc. and Stanley Black & Decker Inc. will likely need to wait until October. Executives of both companies on July 30 said manufacturing’s macro environment remains “pretty challenging and uncertain” or, more succinctly, “soft.”

Speaking to analysts after ITW reported second-quarter profits of $759 million (right in line with those of a year ago) and trimmed the top end of its guidance range, CFO Michael Larsen said the company’s leaders expect to outpace the market in most of the segments where they compete.

The catch: Those segments are on pace to be down slightly from 2023, and the ITW team has lowered its organic growth forecast for the year to flat from its previous range of growth between 1% and 3%.

“We do not expect the short-cycle demand environment to improve,” Larsen said.

A notable factor in that less optimistic organic growth outlook, Larsen noted, is a reduction in automotive clients’ second-half production schedules. Larsen’s peer at Stanley Black & Decker, Pat Hallinan, also cited that trend in speaking to analysts. Hallinan noted that purchases from the auto sector began “trailing off” in late June and that Stanley Black & Decker’s outlook for the rest of this year includes the expectation that its auto segment remains soft.

“We’re just trying to be clear-eyed about the back half,” Hallinan said. “We’re not here to break some big new macro news.”

Larsen was equally clear-eyed on ITW’s call about a topic that kept many industrial executives and analysts covering their companies puzzling earlier this year: When would buyers stop destocking and pick up their purchasing pace? The answer, he said, is clear now.

“Demand is a function of where we are in the economic cycle,” Larsen noted. “So destocking—which was a headwind all of last year—is no longer a significant factor at this point.”

Second-quarter revenues at ITW came in at $4.03 billion, a dip of about 1% from the same period in 2023. At Connecticut-based Stanley Black & Decker, sales totaled $4.02 billion, which was down about 3% year over year.

But both companies’ leadership teams have been hammering away at various efficiency plans while the industrial market has essentially tread water and were able to report stronger gross profit margins. At ITW, that number climbed nearly 140 basis points to 43.8%; at Stanley, it clocked in at 28.4%, a jump of no less than six percentage points as supply-chain and other initiatives have taken hold.

So while we file the companies’ earnings reports under “Not yet,” we ought to make a copy for the “Control what you can control” folder.