Andy Kaplowitz (Citi) asked about the durability of CapEx-segment growth (with orders outpacing revenue implying backlog) and whether CBI can be sustained or pushed even higher.
Michael Larsen confirmed welding and test & measurement order activity is running well ahead of revenue with more backlog than normal, giving high confidence for the back half; Chris O'Herlihy said CBI's 3% is a bit earlier than expected but very sustainable, built like 80/20 over years via a codified innovation framework launched in late 2024, and will rise in every segment.
Tami Zakaria (JPMorgan) asked about intra-quarter and quarter-to-date trends and which segments will see outsized margin growth toward the 30% by 2030 target.
Larsen said Q2's 7% sequential growth was broad-based with April strong, May sustained, and June even better, continuing into a solid Q3 consistent with 4.5% back-half organic guidance; he expects every segment to keep improving margins, with runway in auto OEM (low-to-mid-20s), test & measurement, and food equipment (30%+ over time).
Scott Davis (Melius) asked how ITW measures and incentivizes CBI (including cannibalization) and whether M&A valuations have come down.
Larsen and O'Herlihy explained CBI is truly incremental audited revenue from products launched within three years with cannibalization netted out, and is one of four incentivized long-term metrics; on M&A, valuations have not moved much, and ITW remains 'active but disciplined,' willing to wait given its compelling organic-growth opportunity (MTS cited as a great past deal).
Joe Ritchie (Goldman Sachs) asked how ITW is matching capacity to demand and about the welding margin ceiling.
O'Herlihy said 80/20 is used to proactively add capacity ahead of growth (notably sustained semi/electronics investment through the down cycle now paying off); Larsen said welding margins (32%+) will improve further once the price-cost lag passes and incrementals return to 40%+, with higher growth-related commissions a modest near-term factor.
Jamie Cook (Truist) asked why margin guidance was not raised alongside organic growth and what drove the specialty margin decline.
Larsen said incrementals would have been 40% (margin +80 bps) absent the price-cost lag from crude-oil-derivative resins in auto and specialty; the lag should persist a bit into Q3 then improve, and specialty had the highest price-cost headwind, with resin/oil prices now trending down and higher-margin new products aiding second-half recovery.
Stephen Volkmann (Jefferies) asked about the directional outlook for 2027 incrementals and whether enterprise-initiative focus lessens as growth accelerates.
Larsen said 2027 plans aren't finalized but incrementals in a normal environment are 40%-45% and he'd be surprised not to see 40%+; O'Herlihy credited improving portfolio quality (PLS pruning) and business-model execution plus CBI, and Larsen stressed enterprise initiatives will keep contributing for three-to-four more years alongside, not instead of, organic growth.
Steven Fisher (UBS) asked how much of the polymers & fluids acceleration was comps versus true demand, and about automotive trends in Europe versus China.
O'Herlihy said polymers & fluids' 7% growth was broad-based across all three platforms with a nearly 5% CBI contribution, positioning it as a sustainable 4% grower; Larsen attributed China strength to local EV penetration, called North America mixed and Europe down 5% (with PLS), and flagged emerging India strength.
Andrew Obin (Bank of America) asked about the inflation outlook six months out and the levers available, and what is driving welding's North American strength.
Larsen said inflation is meaningful but manageable (crude-oil derivatives, resin, chemicals, logistics, electronics), with price, productivity, and strategic sourcing as the main levers in ITW's decentralized model; O'Herlihy said welding strength (up 14%, orders higher) was broad-based across industrial and commercial markets and not a surprise, powered by markets plus strong new-product innovation.
David Raso (Evercore ISI) asked for the price-cost exit rate baked into guidance and how to think about price-cost for 2027.
Larsen quantified the drag as ~40 bps in Q2, ~30 bps in Q3, and ~20 bps in Q4 (~20 bps full-year), versus a historical +10-20 bps contribution; he said 2027 should be modeled at that traditional +10-20 bps base case, with enterprise initiatives and higher-margin new products the main margin drivers and 40%-45% incrementals expected.