Here's Why Illinois Tool Works Stock Popped Higher Today (Hint: The U.S. Manufacturing Sector is in Growth Mode)
Key Points
The manufacturing sector is showing signs of recovery in 2026.
ITW upgraded its full-year organic sales growth guidance.
A manufacturing resurgence
Having fallen into the doldrums for a few years, the manufacturing sector was due for a recovery, and according to the widely followed Institute for Supply Management (ISM) Purchasing Managers Index (PMI) survey, 2026 is the year it's taking shape. For reference, after a sustained period of readings below 50 (indicating contraction in the manufacturing economy), the PMI and the New Orders component of the PMI have been solidly above 50 this year.
Still, it's one thing to see positive survey results, and it's another to go through a year in which energy prices have soared and geopolitical tensions are never far from the headlines. That said, the fears of the conflict in the Persian Gulf don't, as yet, appear to have slowed the recovery. A few days ago, Honeywell Technologies upgraded its guidance on the back of improving short-cycle orders, and while 3M's management put its 5.4% year-over-year organic growth in the second quarter down to commercial excellence, it's hard not to think the company had some help from the economy.
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Illinois Tool Works upgrades guidance
Fast forward to Illinois Tool Works, and the company's 4.5% year-over-year organic growth in the second quarter encouraged management to raise its full-year organic sales growth guidance to 3%-4% from a previous range of 1%-3%.
Moreover, CFO Michael Larsen talked of an acceleration in demand with "Every segment came in above their historical kind of typical sequential growth rate with the largest improvement in Welding and Test & Measurement as well as in Polymers & Fluids," and further confirmed that June was "even better" than May and the third quarter was off to a "good start." That's a good sign for manufacturing stocks.
Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Honeywell Technologies. The Motley Fool recommends 3M and Illinois Tool Works. The Motley Fool has a disclosure policy.