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Here's Why Hold Strategy is Apt for ITT Stock Right Now
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ITT Inc. (ITT - Free Report) is well-poised for growth, courtesy of strength across its businesses and accretive acquisitions. The company remains focused on innovating new products, which is also driving growth.
Headquartered in New York, ITT is a global leader in multiple high-technology engineering and manufacturing industries. It engages in the design, manufacture and sale of a wide range of engineered products and services. Over the past year, this Zacks Rank #3 (Hold) company has gained 55.7% compared with the industry’s 9.5% growth.
Image Source: Zacks Investment Research
Let’s discuss the factors that should influence investors to retain this company for the time being.
Business Strength: ITT is gaining from strength across its segments. It is benefiting from higher sales volume and robust order growth. The Industrial Process (IP) segment is gaining from growth in pump projects in the energy, mining and decarbonization market. Strength in the general industrial end market is aiding the segment’s aftermarket business. The acquisition of Svanehøj also bodes well for the segment.
Growth in component and connector sales within the aerospace and defense markets is aiding the Connect and Control Technologies (CCT) segment. Also, the acquisition of Micro-Mode bodes well for the segment. Solid momentum in the friction OEM (original equipment manufacturer), KONI and Axtone businesses is driving growth for the Motion Technologies (MT) segment. Strong demand for the company’s brake components and specialized sealing solutions, shock absorbers and damping technologies in OEM and rail transportation markets are likely to drive the MT segment’s performance in the quarters ahead.
Expansion Efforts: The company solidifies its product portfolio and leverages business opportunities through asset additions. In August 2024, ITT inked a deal to acquire kSARIA Parent, Inc. The acquisition will enhance its product portfolio, technological capabilities and market reach, thereby driving growth and operational efficiency. The buyout is expected to close during the third quarter of 2024, subject to customary closing conditions.
The January 2024 acquisition of privately held Svanehøj Group A/S (Svanehøj) for approximately $395 million expanded ITT’s offerings, particularly in the marine pumps market. The acquisition of Micro-Mode Products, Inc. in May 2023 expanded its product portfolio and customer base, specifically for long-term defense programs. It also grew its North America connectors platform, thereby enhancing the CCT segment.
ITT acquired Clippard Instrument Laboratories’ product lines in August 2022. The stainless steel, brass and aluminum cylinders and volume tanks contributed by this acquisition expanded its compact automation product range targeting the robotics, packaging and automation end markets. The acquisitions of Svanehøj and Micro-Mode contributed 4% to sales growth in second-quarter 2024.
Focus on Innovation: The company is building its capabilities through a focus on innovation. In recent times, this focus has involved friction technologies, connectors and pump businesses. For instance, recently, ITT introduced connectors for applications in the energy storage systems market. In October 2023, it made significant investments in the testing facility of its Yellow Mountains site in Eastern China. Also, in June 2023, the company made an initial investment of €50 million ($54.49 million) to expand a Friction manufacturing facility in Termoli, Italy, and to enhance the research and development competence in Barge, Italy. With this investment, ITT is likely to boost its position in the brake pad market for luxury and sporting vehicles
Rewards to Shareholders: During the first six months of 2024, ITT paid out dividends of $52.6 million, up 9.4% year over year. Also, in 2023, dividend payments totaled $95.8 million and share repurchases were $60 million. The quarterly dividend rate was hiked 10% in February 2024. Also, in October 2023, ITT’s board approved a $1 billion share repurchase program for an indefinite time.
Downsides of ITT
Rising Costs: The company has been grappling with the adverse impacts of cost inflation. In the second quarter of 2024, the cost of sales rose 6.5% year over year. General and administrative expenses also increased 12.3% year over year in the same period. As a percentage of revenues, it rose 30 basis points to 8.5%. High raw material costs are likely to affect margins and profitability in 2024.
Forex Woes: ITT’s international presence keeps it exposed to the risk of adverse currency fluctuations. This is because a strengthening U.S. dollar is likely to require the company to either raise prices or contract profit margins in locations outside the United States. Thus, adverse currency movements are a worry. In the second quarter of 2024, foreign currency translation hurt sales by 1%.
Stocks to Consider
Some better-ranked companies from the same space are discussed below.
VGR delivered a trailing four-quarter average earnings surprise of 15.4%. In the past 60 days, the Zacks Consensus Estimate for Vector Group’s 2024 earnings has increased 5.2%.
Federal Signal Corporation (FSS - Free Report) presently carries a Zacks Rank of 2. The company delivered a trailing four-quarter average earnings surprise of 12.3%.
In the past 60 days, the Zacks Consensus Estimate for FSS’ 2024 earnings has increased 2.9%.
Carlisle Companies Incorporated (CSL - Free Report) currently carries a Zacks Rank of 2. CSL delivered a trailing four-quarter average earnings surprise of 16.3%.
In the past 60 days, the consensus estimate for CSL’s 2024 earnings has increased 1.7%.
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Here's Why Hold Strategy is Apt for ITT Stock Right Now
ITT Inc. (ITT - Free Report) is well-poised for growth, courtesy of strength across its businesses and accretive acquisitions. The company remains focused on innovating new products, which is also driving growth.
Headquartered in New York, ITT is a global leader in multiple high-technology engineering and manufacturing industries. It engages in the design, manufacture and sale of a wide range of engineered products and services. Over the past year, this Zacks Rank #3 (Hold) company has gained 55.7% compared with the industry’s 9.5% growth.
Image Source: Zacks Investment Research
Let’s discuss the factors that should influence investors to retain this company for the time being.
Business Strength: ITT is gaining from strength across its segments. It is benefiting from higher sales volume and robust order growth. The Industrial Process (IP) segment is gaining from growth in pump projects in the energy, mining and decarbonization market. Strength in the general industrial end market is aiding the segment’s aftermarket business. The acquisition of Svanehøj also bodes well for the segment.
Growth in component and connector sales within the aerospace and defense markets is aiding the Connect and Control Technologies (CCT) segment. Also, the acquisition of Micro-Mode bodes well for the segment. Solid momentum in the friction OEM (original equipment manufacturer), KONI and Axtone businesses is driving growth for the Motion Technologies (MT) segment. Strong demand for the company’s brake components and specialized sealing solutions, shock absorbers and damping technologies in OEM and rail transportation markets are likely to drive the MT segment’s performance in the quarters ahead.
Expansion Efforts: The company solidifies its product portfolio and leverages business opportunities through asset additions. In August 2024, ITT inked a deal to acquire kSARIA Parent, Inc. The acquisition will enhance its product portfolio, technological capabilities and market reach, thereby driving growth and operational efficiency. The buyout is expected to close during the third quarter of 2024, subject to customary closing conditions.
The January 2024 acquisition of privately held Svanehøj Group A/S (Svanehøj) for approximately $395 million expanded ITT’s offerings, particularly in the marine pumps market. The acquisition of Micro-Mode Products, Inc. in May 2023 expanded its product portfolio and customer base, specifically for long-term defense programs. It also grew its North America connectors platform, thereby enhancing the CCT segment.
ITT acquired Clippard Instrument Laboratories’ product lines in August 2022. The stainless steel, brass and aluminum cylinders and volume tanks contributed by this acquisition expanded its compact automation product range targeting the robotics, packaging and automation end markets. The acquisitions of Svanehøj and Micro-Mode contributed 4% to sales growth in second-quarter 2024.
Focus on Innovation: The company is building its capabilities through a focus on innovation. In recent times, this focus has involved friction technologies, connectors and pump businesses. For instance, recently, ITT introduced connectors for applications in the energy storage systems market. In October 2023, it made significant investments in the testing facility of its Yellow Mountains site in Eastern China. Also, in June 2023, the company made an initial investment of €50 million ($54.49 million) to expand a Friction manufacturing facility in Termoli, Italy, and to enhance the research and development competence in Barge, Italy. With this investment, ITT is likely to boost its position in the brake pad market for luxury and sporting vehicles
Rewards to Shareholders: During the first six months of 2024, ITT paid out dividends of $52.6 million, up 9.4% year over year. Also, in 2023, dividend payments totaled $95.8 million and share repurchases were $60 million. The quarterly dividend rate was hiked 10% in February 2024. Also, in October 2023, ITT’s board approved a $1 billion share repurchase program for an indefinite time.
Downsides of ITT
Rising Costs: The company has been grappling with the adverse impacts of cost inflation. In the second quarter of 2024, the cost of sales rose 6.5% year over year. General and administrative expenses also increased 12.3% year over year in the same period. As a percentage of revenues, it rose 30 basis points to 8.5%. High raw material costs are likely to affect margins and profitability in 2024.
Forex Woes: ITT’s international presence keeps it exposed to the risk of adverse currency fluctuations. This is because a strengthening U.S. dollar is likely to require the company to either raise prices or contract profit margins in locations outside the United States. Thus, adverse currency movements are a worry. In the second quarter of 2024, foreign currency translation hurt sales by 1%.
Stocks to Consider
Some better-ranked companies from the same space are discussed below.
Vector Group Ltd. (VGR - Free Report) currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
VGR delivered a trailing four-quarter average earnings surprise of 15.4%. In the past 60 days, the Zacks Consensus Estimate for Vector Group’s 2024 earnings has increased 5.2%.
Federal Signal Corporation (FSS - Free Report) presently carries a Zacks Rank of 2. The company delivered a trailing four-quarter average earnings surprise of 12.3%.
In the past 60 days, the Zacks Consensus Estimate for FSS’ 2024 earnings has increased 2.9%.
Carlisle Companies Incorporated (CSL - Free Report) currently carries a Zacks Rank of 2. CSL delivered a trailing four-quarter average earnings surprise of 16.3%.
In the past 60 days, the consensus estimate for CSL’s 2024 earnings has increased 1.7%.