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ITT Q4 Earnings Surpass Estimates, Revenues Rise 13% Y/Y
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ITT Inc.’s (ITT - Free Report) fourth-quarter 2022 adjusted earnings (excluding 10 cents from non-recurring items) of $1.29 per share surpassed the Zacks Consensus Estimate by 5 cents. This compares with our estimate of $1.23. The bottom line increased 22% year over year, owing to higher revenues.
Total revenues of $775 million beat the Zacks Consensus Estimate of $766 million. This compares with our estimate of $760.8 million. The top line increased 13% 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 17% year over year.
In the reported quarter, total orders climbed 8% year over year, thanks to strong demand for connectors, aerospace and defense components, and pump projects. The metric increased 12% on an organic basis.
Segmental Results
Revenues from Industrial Process totaled $280.7 million, up 29.8% year over year. The Zacks Consensus Estimate for the Industrial Process segment revenues was $281 million. Our estimate for the quarter was $237.9 million.
Growth in short-cycle business, pump projects within the energy market and the acquisition of Habonim boosted segmental revenues. Organic sales increased 26.7%. Organic orders jumped 5.5%. The adjusted operating income augmented 87.7% year over year.
Revenues from Motion Technologies totaled $330.4 million, reflecting a year-over-year increase of 2.1%. The Zacks Consensus Estimate for Motion Technologies revenues was $328 million. Our estimate for the quarter was $359 million. Robust growth in Friction OE from pricing recovery and higher volumes aided the segment’s revenues. Organic revenue rose 12.1% owing to growth in Friction. The adjusted operating income decreased 23.9% year over year.
Revenues from Connect and Control Technologies totaled $164.6 million, up 12.9% year over year and up 12.1%, organically. The Zacks Consensus Estimate for Connect and Control Technologies revenues was $167 million. Our estimate for the quarter was $164.5 million.
Strong performance in industrial connectors and strength in aerospace components, aerospace and defense and industrial markets drove segmental revenues. The adjusted operating income soared 17.9% year over year owing to productivity improvement, higher sales and pricing actions. Organic orders in the segment rose 18.6%.
During the fourth quarter, ITT’s cost of revenues increased 14% year over year to $526.3 million. The gross profit increased 10.9% to $248.3 million.
General and administrative expenses decreased 2.5% year over year to $51.6 million, while sales and marketing expenses rose 0.5% to $38.6 million. Research and development expenses were down 8.4% to $22.8.4 million.
The adjusted segmental operating income in the quarter increased 30% year over year to $144.3 million. The margin increased 270 basis points (bps) to 20.6%. Results benefited from higher sales volume and pricing actions.
Balance Sheet and Cash Flow
Exiting the fourth quarter, ITT had cash and cash equivalents of $561.2 million, compared with $647.5 million at the end of fourth-quarter 2021. Its commercial paper and current maturities of long-term debt were $451 million compared with $197.6 million at the end of December 2021.
In 2022, ITT generated net cash of $277.7 million from operating activities against $8.5 million used in the year-ago period. At the end of 2022, capital expenditure was $103.9 million, up 17.5% year over year. Free cash flow was $173.8 million in 2022 against free cash outflow of $96.8 million at the end of the year-ago period.
During 2022, ITT paid out dividends of $87.9 million, up 16% year over year. Share repurchases were $245.3 million in the same period, reflecting an increase of 143.1% year over year.
ITT announced that its board of directors approved a 10% hike in the quarterly dividend rate. It now stands at 29 cents per share. The company will pay out the revised amount on Apr 3, 2023, to shareholders on record as of Mar 9, 2023.
2023 Outlook
ITT expects organic revenues to increase 6-8% and net revenues to increase 7-9% for 2023. The segment operating margin is predicted to be approximately 17-17.8%, while the adjusted segment operating margin is estimated to be 17.3-18.1%.
For the full year, ITT expects a free cash flow of $350-$400, representing a free cash flow margin of 11% to 12% for the full year 2023. The company forecasts earnings of $4.38-$4.78 for 2023. Adjusted earnings are expected to be $4.55-$4.95.
Zacks Rank & Stocks to Consider
ITT currently has a Zacks Rank #3 (Hold). Some better-ranked companies are discussed below:
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ITT Q4 Earnings Surpass Estimates, Revenues Rise 13% Y/Y
ITT Inc.’s (ITT - Free Report) fourth-quarter 2022 adjusted earnings (excluding 10 cents from non-recurring items) of $1.29 per share surpassed the Zacks Consensus Estimate by 5 cents. This compares with our estimate of $1.23. The bottom line increased 22% year over year, owing to higher revenues.
Total revenues of $775 million beat the Zacks Consensus Estimate of $766 million. This compares with our estimate of $760.8 million. The top line increased 13% 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 17% year over year.
In the reported quarter, total orders climbed 8% year over year, thanks to strong demand for connectors, aerospace and defense components, and pump projects. The metric increased 12% on an organic basis.
Segmental Results
Revenues from Industrial Process totaled $280.7 million, up 29.8% year over year. The Zacks Consensus Estimate for the Industrial Process segment revenues was $281 million. Our estimate for the quarter was $237.9 million.
Growth in short-cycle business, pump projects within the energy market and the acquisition of Habonim boosted segmental revenues. Organic sales increased 26.7%. Organic orders jumped 5.5%. The adjusted operating income augmented 87.7% year over year.
Revenues from Motion Technologies totaled $330.4 million, reflecting a year-over-year increase of 2.1%. The Zacks Consensus Estimate for Motion Technologies revenues was $328 million. Our estimate for the quarter was $359 million. Robust growth in Friction OE from pricing recovery and higher volumes aided the segment’s revenues. Organic revenue rose 12.1% owing to growth in Friction. The adjusted operating income decreased 23.9% year over year.
Revenues from Connect and Control Technologies totaled $164.6 million, up 12.9% year over year and up 12.1%, organically. The Zacks Consensus Estimate for Connect and Control Technologies revenues was $167 million. Our estimate for the quarter was $164.5 million.
Strong performance in industrial connectors and strength in aerospace components, aerospace and defense and industrial markets drove segmental revenues. The adjusted operating income soared 17.9% year over year owing to productivity improvement, higher sales and pricing actions. Organic orders in the segment rose 18.6%.
ITT Inc. Price, Consensus and EPS Surprise
ITT Inc. price-consensus-eps-surprise-chart | ITT Inc. Quote
Margin Profile
During the fourth quarter, ITT’s cost of revenues increased 14% year over year to $526.3 million. The gross profit increased 10.9% to $248.3 million.
General and administrative expenses decreased 2.5% year over year to $51.6 million, while sales and marketing expenses rose 0.5% to $38.6 million. Research and development expenses were down 8.4% to $22.8.4 million.
The adjusted segmental operating income in the quarter increased 30% year over year to $144.3 million. The margin increased 270 basis points (bps) to 20.6%. Results benefited from higher sales volume and pricing actions.
Balance Sheet and Cash Flow
Exiting the fourth quarter, ITT had cash and cash equivalents of $561.2 million, compared with $647.5 million at the end of fourth-quarter 2021. Its commercial paper and current maturities of long-term debt were $451 million compared with $197.6 million at the end of December 2021.
In 2022, ITT generated net cash of $277.7 million from operating activities against $8.5 million used in the year-ago period. At the end of 2022, capital expenditure was $103.9 million, up 17.5% year over year. Free cash flow was $173.8 million in 2022 against free cash outflow of $96.8 million at the end of the year-ago period.
During 2022, ITT paid out dividends of $87.9 million, up 16% year over year. Share repurchases were $245.3 million in the same period, reflecting an increase of 143.1% year over year.
ITT announced that its board of directors approved a 10% hike in the quarterly dividend rate. It now stands at 29 cents per share. The company will pay out the revised amount on Apr 3, 2023, to shareholders on record as of Mar 9, 2023.
2023 Outlook
ITT expects organic revenues to increase 6-8% and net revenues to increase 7-9% for 2023. The segment operating margin is predicted to be approximately 17-17.8%, while the adjusted segment operating margin is estimated to be 17.3-18.1%.
For the full year, ITT expects a free cash flow of $350-$400, representing a free cash flow margin of 11% to 12% for the full year 2023. The company forecasts earnings of $4.38-$4.78 for 2023. Adjusted earnings are expected to be $4.55-$4.95.
Zacks Rank & Stocks to Consider
ITT currently has a Zacks Rank #3 (Hold). Some better-ranked companies are discussed below:
Allegion plc (ALLE - Free Report) presently carries a Zacks Rank #2 (Buy). ALLE’s earnings surprise in the last four quarters was 8.8%, on average. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks.
In the past 60 days, Allegion’s earnings estimates have remained steady for 2022. The stock has gained 16.4% in the past six months.
A. O. Smith Corporation (AOS - Free Report) presently carries a Zacks Rank of 2 and a trailing four-quarter earnings surprise of 3.2%, on average.
AOS’ earnings estimates have increased 3.1% for 2023 in the past 60 days. Shares of A. O. Smith have risen 6.6% in the past six months.
Valmont Industries, Inc. (VMI - Free Report) presently has a Zacks Rank of 2. VMI’s earnings surprise in the last four quarters was 12.5%, on average.
In the past 60 days, Valmont’s earnings estimates have increased by a penny. The stock has rallied 13.6% in the past six months.