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Why ITT Shares Are Up Nearly 5% Since Q3 Earnings Release
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ITT Inc.’s (ITT - Free Report) shares have gained 4.8% since the third-quarter 2022 earnings release on Nov 3. Earnings beat coupled with the company’s improved outlook for 2022 revenues seems to have pleased investors.
ITT’s third-quarter 2022 adjusted earnings (excluding 3 cents from non-recurring items) of $1.20 per share surpassed the Zacks Consensus Estimate by 2 cents. This compares with our estimate of $1.19. The bottom line increased 21.2% year over year, owing to higher revenues.
For 2022, the company expects revenues to increase 8% year over year compared with 7-9% predicted earlier.
Total revenues of $753.6 million underperformed the Zacks Consensus Estimate of $754 million. This compares with our estimate of $759.6 million. However, the top line increased 9.3% year over year, owing to strong demand in Connect & Control Technologies and Industrial Process segments and pricing actions. The acquisition of Habonim contributed 2% to the top line. Organic sales rose 9.6% year over year.
In the reported quarter, total orders climbed 7% year over year, thanks to strong demand for pumps, connectors, andaerospace and defense components. The metric increased 13% on an organic basis.
Segmental Results
Revenues from Industrial Process totaled $248.5 million, up 17.9% year over year. The Zacks Consensus Estimate for Industrial Process segment revenues was $238 million. Our estimate for the quarter was $ $232.9 million.
Growth in short-cycle business, pump projects within the energy market and the acquisition of Habonim boosted segmental revenues. Organic sales increased 14.6%. Organic orders jumped 11.4%.The adjusted operating income augmented 59.3% year over year.
Revenues from Motion Technologies totaled $342.2 million, reflecting a year-over-year increase of 3%. The Zacks Consensus Estimate for Motion Technologies revenues was $353 million. Our estimate for the quarter was $363.7 million. Robust growth in Friction OE from pricing recovery and higher volumes aided the segment’s revenues. Organic revenue rose 14.9% owing to growth in Friction. Adjusted operating income decreased 6.2% year over year.
Revenues from Connect and Control Technologies totaled $163.2 million, up 10.9% year over year and up 15.4%, organically. The Zacks Consensus Estimate for Connect and Control Technologies revenues was $170 million. Our estimate for the quarter was $163.3 million.
Strong performance in industrial connectors and strength in aerospace components drove segmental revenues. Adjusted operating income soared 20.7% year over year owing to productivity improvement, higher sales and pricing actions. Organic orders in the segment rose 11.5%.
During the third quarter, ITT’s cost of revenues increased 11.2% year over year to $520.2 million. Gross profit increased 5.1% to $233.4 million.
General and administrative expenses decreased 27.2% year over year to $47.5 million, while sales and marketing expenses rose 5.6% to $39.5 million. Research and development expenses inched up 4.4% to $24.4 million.
Adjusted segmental operating income in the quarter increased 18% year over year to $137 million. The margin increased 140 basis points (bps) to 18.2%. Results benefited from higher sales volume and pricing actions.
Balance Sheet and Cash Flow
Exiting the third quarter, ITT had cash and cash equivalents of $ 514.5 million, compared with $647.5 million at the end of fourth-quarter 2021. Its commercial paper and current maturities of long-term debt were $541.4 million compared with $197.6 million at the end of December 2021.
In the first nine months of 2022, ITT generated net cash of $115.2 million from operating activities against $127.9 million used in the year-ago period. At the end of the first nine months of 2022, capital expenditure was $73.7 million, up 40.1% year over year. Free cash flow was $41.5 million in the first nine months of 2022 against free cash outflow of $180.5 million at the end of the year-ago period.
During the first nine months of 2022, ITT paid out dividends of $66.1 million, up 16% year over year. Share repurchases were $245.6 million in the same period, reflecting an increase of 143.9% year over year.
2022 Outlook
ITT expects organic revenues, to increase 8% (10-12% increase expected earlier) for 2022. The company expects the Russia-Ukraine war to impact sales to the tune of approximately $85 million (earlier prediction of $80 million). The segment operating margin is predicted to be approximately 17% compared with 17.5-18.4% anticipated earlier, while the adjusted segment operating margin is estimated to be 17.6% (17.6-18.5% predicted earlier).
For the full year, ITT expects a free cash flow of $135-$165 million compared with $250-$300 million predicted earlier. The company forecasts earnings of $4.12-$4.45 for 2022. Adjusted earnings are expected to be $4.35-$4.65. The Zacks Consensus Estimate for the same stands at $4.40.
EPAC’s earnings estimates have increased 9.1% for fiscal 2023 (ending August 2023) in the past 60 days. The company’s shares have gained 32% in the past six months.
Applied Industrial Technologies, Inc. (AIT - Free Report) presently has a Zacks Rank #1 and a trailing four-quarter earnings surprise of 24.8%, on average.
AIT’s earnings estimates have increased 3% for fiscal 2023 (ending June 2023) in the past 60 days. The company’s shares have risen 18.3% in the past six months.
IDEX Corporation (IEX - Free Report) presently has a Zacks Rank of 2 (Buy). IEX’s earnings surprise in the last four quarters was 5.7%, on average.
In the past 60 days, IDEX’s earnings estimates have increased 1.8% for 2022. The stock has rallied 17.8% in the past six months.
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Why ITT Shares Are Up Nearly 5% Since Q3 Earnings Release
ITT Inc.’s (ITT - Free Report) shares have gained 4.8% since the third-quarter 2022 earnings release on Nov 3. Earnings beat coupled with the company’s improved outlook for 2022 revenues seems to have pleased investors.
ITT’s third-quarter 2022 adjusted earnings (excluding 3 cents from non-recurring items) of $1.20 per share surpassed the Zacks Consensus Estimate by 2 cents. This compares with our estimate of $1.19. The bottom line increased 21.2% year over year, owing to higher revenues.
For 2022, the company expects revenues to increase 8% year over year compared with 7-9% predicted earlier.
Total revenues of $753.6 million underperformed the Zacks Consensus Estimate of $754 million. This compares with our estimate of $759.6 million. However, the top line increased 9.3% year over year, owing to strong demand in Connect & Control Technologies and Industrial Process segments and pricing actions. The acquisition of Habonim contributed 2% to the top line. Organic sales rose 9.6% year over year.
In the reported quarter, total orders climbed 7% year over year, thanks to strong demand for pumps, connectors, andaerospace and defense components. The metric increased 13% on an organic basis.
Segmental Results
Revenues from Industrial Process totaled $248.5 million, up 17.9% year over year. The Zacks Consensus Estimate for Industrial Process segment revenues was $238 million. Our estimate for the quarter was $ $232.9 million.
Growth in short-cycle business, pump projects within the energy market and the acquisition of Habonim boosted segmental revenues. Organic sales increased 14.6%. Organic orders jumped 11.4%.The adjusted operating income augmented 59.3% year over year.
Revenues from Motion Technologies totaled $342.2 million, reflecting a year-over-year increase of 3%. The Zacks Consensus Estimate for Motion Technologies revenues was $353 million. Our estimate for the quarter was $363.7 million. Robust growth in Friction OE from pricing recovery and higher volumes aided the segment’s revenues. Organic revenue rose 14.9% owing to growth in Friction. Adjusted operating income decreased 6.2% year over year.
Revenues from Connect and Control Technologies totaled $163.2 million, up 10.9% year over year and up 15.4%, organically. The Zacks Consensus Estimate for Connect and Control Technologies revenues was $170 million. Our estimate for the quarter was $163.3 million.
Strong performance in industrial connectors and strength in aerospace components drove segmental revenues. Adjusted operating income soared 20.7% year over year owing to productivity improvement, higher sales and pricing actions. Organic orders in the segment rose 11.5%.
ITT Inc. Price and Consensus
ITT Inc. price-consensus-chart | ITT Inc. Quote
Margin Profile
During the third quarter, ITT’s cost of revenues increased 11.2% year over year to $520.2 million. Gross profit increased 5.1% to $233.4 million.
General and administrative expenses decreased 27.2% year over year to $47.5 million, while sales and marketing expenses rose 5.6% to $39.5 million. Research and development expenses inched up 4.4% to $24.4 million.
Adjusted segmental operating income in the quarter increased 18% year over year to $137 million. The margin increased 140 basis points (bps) to 18.2%. Results benefited from higher sales volume and pricing actions.
Balance Sheet and Cash Flow
Exiting the third quarter, ITT had cash and cash equivalents of $ 514.5 million, compared with $647.5 million at the end of fourth-quarter 2021. Its commercial paper and current maturities of long-term debt were $541.4 million compared with $197.6 million at the end of December 2021.
In the first nine months of 2022, ITT generated net cash of $115.2 million from operating activities against $127.9 million used in the year-ago period. At the end of the first nine months of 2022, capital expenditure was $73.7 million, up 40.1% year over year. Free cash flow was $41.5 million in the first nine months of 2022 against free cash outflow of $180.5 million at the end of the year-ago period.
During the first nine months of 2022, ITT paid out dividends of $66.1 million, up 16% year over year. Share repurchases were $245.6 million in the same period, reflecting an increase of 143.9% year over year.
2022 Outlook
ITT expects organic revenues, to increase 8% (10-12% increase expected earlier) for 2022. The company expects the Russia-Ukraine war to impact sales to the tune of approximately $85 million (earlier prediction of $80 million). The segment operating margin is predicted to be approximately 17% compared with 17.5-18.4% anticipated earlier, while the adjusted segment operating margin is estimated to be 17.6% (17.6-18.5% predicted earlier).
For the full year, ITT expects a free cash flow of $135-$165 million compared with $250-$300 million predicted earlier. The company forecasts earnings of $4.12-$4.45 for 2022. Adjusted earnings are expected to be $4.35-$4.65. The Zacks Consensus Estimate for the same stands at $4.40.
Zacks Rank & Stocks to Consider
ITT currently carries a Zacks Rank #3 (Hold).
Some better-ranked companies are discussed below:
Enerpac Tool Group Corp. (EPAC - Free Report) delivered an average four-quarter earnings surprise of 3.4%. EPAC presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks.
EPAC’s earnings estimates have increased 9.1% for fiscal 2023 (ending August 2023) in the past 60 days. The company’s shares have gained 32% in the past six months.
Applied Industrial Technologies, Inc. (AIT - Free Report) presently has a Zacks Rank #1 and a trailing four-quarter earnings surprise of 24.8%, on average.
AIT’s earnings estimates have increased 3% for fiscal 2023 (ending June 2023) in the past 60 days. The company’s shares have risen 18.3% in the past six months.
IDEX Corporation (IEX - Free Report) presently has a Zacks Rank of 2 (Buy). IEX’s earnings surprise in the last four quarters was 5.7%, on average.
In the past 60 days, IDEX’s earnings estimates have increased 1.8% for 2022. The stock has rallied 17.8% in the past six months.