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ITT Q2 Earnings Surpass Estimates, Revenues Increase Y/Y
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ITT Inc.’s (ITT - Free Report) second-quarter 2024 adjusted earnings of $1.49 per share surpassed the Zacks Consensus Estimate of $1.46. The bottom line jumped 12% year over year, aided by an increase in sales across each of its segments.
Total revenues of $905.9 million narrowly missed the consensus estimate of $907 million. However, the top line increased 8.6% year over year, buoyed by higher friction original equipment volume and aftermarket demand in the Motion Technologies segment. Also, short cycle demand in the Industrial Process segment and industrial connectors growth in the Connect & Control Technologies segment aided the results. The acquisitions of Svanehøj and Micro-Mode contributed 4% to the top line.
Organic sales rose approximately 6% year over year. Foreign currency translation had a 1% unfavorable impact on sales.
Segmental Results
Revenues from the Industrial Process segment totaled $330.7 million, up 12.6% year over year. Strength in pump projects, solid demand for aftermarket parts and services and the buyout of Svanehøj drove the segment’s performance. Organic sales increased 2.6% and adjusted operating income grew 1.5% on a year-over-year basis. Our estimate for segmental revenues was pinned at $338 million.
Revenues from the Motion Technologies segment amounted to $384.5 million, implying a year-over-year increase of 4.3%. Higher sales volume in friction original equipment and rail demand in the KONI business aided the segmental performance. Organic revenues grew 6.3%. Adjusted operating income increased 22.9%. Our estimate for segmental revenues was pinned at $386 million.
Revenues from the Connect & Control Technologies segment of $191.8 million rose 11.4% year over year on a reported basis and 11.1% organically. Our estimate was $186 million. Favorable pricing actions and volume growth in aerospace and defense components aided the segment’s performance. Adjusted operating income increased 19.5% year over year.
ITT’s cost of revenues increased 6.5% year over year to $589.8 million. The gross profit jumped 12.9% to $316.1 million.
General and administrative expenses grew 12.3% year over year to $76.8 million. Sales and marketing expenses rose 15.3% to $50.6 million. Research and development expenses increased 15.6% year over year to $29.7 million.
Adjusted operating income climbed 14.9% year over year to $163.2 million. The margin expanded 100 basis points to 18%
Balance Sheet and Cash Flow
Exiting the second quarter, ITT had cash and cash equivalents of $425.5 million compared with $489.2 million at the end of fourth-quarter 2023. The company’s short-term borrowings were $357.5 million compared with $187.7 million at the end of December 2023.
In the first six months of 2024, ITT generated net cash of $215.5 million from operating activities compared with $197.8 million in the year-ago period. Capital expenditure totaled $50.9 million in the same period, up 10.2% year over year. Free cash flow was $164.6 million in the first six months of the year compared with $151.5 million in the prior-year period.
During the first six months of the year, ITT paid out dividends of $52.6 million, up 9.4% year over year. It repurchased shares worth $79 million compared with the share repurchase of $60 million in the year-ago period.
2024 Outlook
ITT reaffirmed its financial outlook for 2024. The company expects adjusted earnings to be in the range of $5.65-$5.90 per share. The guided range indicates an increase of 8-13% from the prior-year actual.
Management projects revenue growth to be in the band of 9-12% (4-7% organically). Adjusted segment operating margin is estimated to be between 17.1% and 17.7%. Free cash flow is predicted to be in the range of $435-$475 million. This indicates a free cash flow margin of 12-13%.
Zacks Rank & Key Picks
ITT currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks are discussed below.
It has a trailing four-quarter average earnings surprise of 12.3%. The Zacks Consensus Estimate for FSS’ 2024 earnings has increased 5.2% in the past 60 days.
Honeywell International Inc. (HON - Free Report) currently carries a Zacks Rank #2 (Buy). It has a trailing four-quarter average earnings surprise of 2.1%. The consensus estimate for HON’s 2024 earnings has increased 2.3% in the past 60 days.
Carlisle Companies Incorporated (CSL - Free Report) carries a Zacks Rank of 2 at present. CSL delivered a trailing four-quarter average earnings surprise of 16.3%. In the past 60 days, the Zacks Consensus Estimate for CSL’s 2024 earnings has increased 2.1%.
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ITT Q2 Earnings Surpass Estimates, Revenues Increase Y/Y
ITT Inc.’s (ITT - Free Report) second-quarter 2024 adjusted earnings of $1.49 per share surpassed the Zacks Consensus Estimate of $1.46. The bottom line jumped 12% year over year, aided by an increase in sales across each of its segments.
Total revenues of $905.9 million narrowly missed the consensus estimate of $907 million. However, the top line increased 8.6% year over year, buoyed by higher friction original equipment volume and aftermarket demand in the Motion Technologies segment. Also, short cycle demand in the Industrial Process segment and industrial connectors growth in the Connect & Control Technologies segment aided the results. The acquisitions of Svanehøj and Micro-Mode contributed 4% to the top line.
Organic sales rose approximately 6% year over year. Foreign currency translation had a 1% unfavorable impact on sales.
Segmental Results
Revenues from the Industrial Process segment totaled $330.7 million, up 12.6% year over year. Strength in pump projects, solid demand for aftermarket parts and services and the buyout of Svanehøj drove the segment’s performance. Organic sales increased 2.6% and adjusted operating income grew 1.5% on a year-over-year basis. Our estimate for segmental revenues was pinned at $338 million.
Revenues from the Motion Technologies segment amounted to $384.5 million, implying a year-over-year increase of 4.3%. Higher sales volume in friction original equipment and rail demand in the KONI business aided the segmental performance. Organic revenues grew 6.3%. Adjusted operating income increased 22.9%. Our estimate for segmental revenues was pinned at $386 million.
Revenues from the Connect & Control Technologies segment of $191.8 million rose 11.4% year over year on a reported basis and 11.1% organically. Our estimate was $186 million. Favorable pricing actions and volume growth in aerospace and defense components aided the segment’s performance. Adjusted operating income increased 19.5% year over year.
ITT Inc. Price, Consensus and EPS Surprise
ITT Inc. price-consensus-eps-surprise-chart | ITT Inc. Quote
Margin Profile
ITT’s cost of revenues increased 6.5% year over year to $589.8 million. The gross profit jumped 12.9% to $316.1 million.
General and administrative expenses grew 12.3% year over year to $76.8 million. Sales and marketing expenses rose 15.3% to $50.6 million. Research and development expenses increased 15.6% year over year to $29.7 million.
Adjusted operating income climbed 14.9% year over year to $163.2 million. The margin expanded 100 basis points to 18%
Balance Sheet and Cash Flow
Exiting the second quarter, ITT had cash and cash equivalents of $425.5 million compared with $489.2 million at the end of fourth-quarter 2023. The company’s short-term borrowings were $357.5 million compared with $187.7 million at the end of December 2023.
In the first six months of 2024, ITT generated net cash of $215.5 million from operating activities compared with $197.8 million in the year-ago period. Capital expenditure totaled $50.9 million in the same period, up 10.2% year over year. Free cash flow was $164.6 million in the first six months of the year compared with $151.5 million in the prior-year period.
During the first six months of the year, ITT paid out dividends of $52.6 million, up 9.4% year over year. It repurchased shares worth $79 million compared with the share repurchase of $60 million in the year-ago period.
2024 Outlook
ITT reaffirmed its financial outlook for 2024. The company expects adjusted earnings to be in the range of $5.65-$5.90 per share. The guided range indicates an increase of 8-13% from the prior-year actual.
Management projects revenue growth to be in the band of 9-12% (4-7% organically). Adjusted segment operating margin is estimated to be between 17.1% and 17.7%. Free cash flow is predicted to be in the range of $435-$475 million. This indicates a free cash flow margin of 12-13%.
Zacks Rank & Key Picks
ITT currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks are discussed below.
Federal Signal Corporation (FSS - Free Report) presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
It has a trailing four-quarter average earnings surprise of 12.3%. The Zacks Consensus Estimate for FSS’ 2024 earnings has increased 5.2% in the past 60 days.
Honeywell International Inc. (HON - Free Report) currently carries a Zacks Rank #2 (Buy). It has a trailing four-quarter average earnings surprise of 2.1%. The consensus estimate for HON’s 2024 earnings has increased 2.3% in the past 60 days.
Carlisle Companies Incorporated (CSL - Free Report) carries a Zacks Rank of 2 at present. CSL delivered a trailing four-quarter average earnings surprise of 16.3%. In the past 60 days, the Zacks Consensus Estimate for CSL’s 2024 earnings has increased 2.1%.