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ITT Inc. (ITT) Q4 Earnings: What's in Store for the Stock?
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ITT Inc. (ITT - Free Report) is slated to report fourth-quarter 2016 results before the opening bell on Feb 14.
Last quarter, the company’s earnings came in line with the Zacks Consensus Estimate. ITT Inc. has a positive earnings surprise of 4.3%, with earnings meeting estimates twice and beating in the other two quarters.
Let's see how things are shaping up for this announcement.
Factors to Consider
ITT Inc.’s diversified operations across key end markets, geographies and business cycles, have been the company’s biggest strengths which aid in combating weakness in a single market. In addition, the company’s focus on execution, effective capital deployment and market expansion, has been driving its key fianancial performance.
During third-quarter 2016, operational execution delivered a combined 510-basis point margin improvement, that included $35 million in gross productivity savings, driven by benefits from lean efforts.
The company’s diligent restructuring activitities have produced tangible improvements in operational effectiveness in most of its segments. For instance, the Motion Technologies platform, witnessed a 34% rise in adjusted operating income during the third quarter. We believe that the strategic restructuring efforts undertaken at Industrial Process, Interconnect Solutions and Control Technologies over the past few months will result in substantial restructuring savings for the soon-to-be-reported quarter.
Morover, the company’s market expansion drive is likely to boost its fourth-quarter results. Presently, the company is focusing on expanding in the higher-margin aftermarket business by concentrating on low-cost technological solutions. During the third quarter, Motion Technologies grabbed higher market share through expanding its global automotive customer base. It also completed the Axtone buyout during the fourth quarter which is expected to be accretive to its earnings in the first full year after its closure.
Despite these positives, unfavorable oil prices have been acting as a major growth dampener for the company. Based on unfavorable oil price movement, the company foresees decline in revenues of the oil and gas segments for full-year 2016. As upstream oil projects are the most vulnerable to decline in oil and gas prices, the company estimates revenues to drop mainly due to project delays, lower capital expenditure on part of clients, high cost of projects and pricing pressures.
During third-quarter 2016, the company’s Interconnected Solutions and Industrial Process segments were hurt by weakness in the oil and gas sector, and mining project activity, combined with extended delays in maintenance spending. Concurrent with the third-quarter earnings release, ITT Inc. had slashed its top- and bottom-line guidance for full-year 2016, anticipating lower project profitability and unfavorable foreign exchange at Industrial Process.
In addition, constant strengthening of the U.S. dollar, lower short-cycle pump and project activity across all key end markets, are likely to play be major spoilsports for the fourth-quarter top-line performance.
Earnings Whispers
Our proven model does not conclusively show that ITT Inc. will beat earnings estimates in this quarter. This is because a stock needs to have both a positive Earnings ESPand a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.
Zacks ESP: Earnings ESP for the company is currently pegged at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 42 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: ITT Inc.’s Zacks Rank #3, when combined with 0.00% ESP, makes surprise prediction difficult.
Note that we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
DaVita HealthCare Partners Inc. (DVA - Free Report) has an Earnings ESP of +4.40% and a Zacks Rank #3. Additionally, on an average, the stock has recorded a positive surprise of almost 4.4% in the last four quarters.
Exilixis, Inc. (EXEL - Free Report) has an Earnings ESP of +200.00% and a Zacks Rank #2. The stock had registered a whopping positive earnings surprise of 107.69% in the last reported quarter.
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ITT Inc. (ITT) Q4 Earnings: What's in Store for the Stock?
ITT Inc. (ITT - Free Report) is slated to report fourth-quarter 2016 results before the opening bell on Feb 14.
Last quarter, the company’s earnings came in line with the Zacks Consensus Estimate. ITT Inc. has a positive earnings surprise of 4.3%, with earnings meeting estimates twice and beating in the other two quarters.
Let's see how things are shaping up for this announcement.
Factors to Consider
ITT Inc.’s diversified operations across key end markets, geographies and business cycles, have been the company’s biggest strengths which aid in combating weakness in a single market. In addition, the company’s focus on execution, effective capital deployment and market expansion, has been driving its key fianancial performance.
During third-quarter 2016, operational execution delivered a combined 510-basis point margin improvement, that included $35 million in gross productivity savings, driven by benefits from lean efforts.
The company’s diligent restructuring activitities have produced tangible improvements in operational effectiveness in most of its segments. For instance, the Motion Technologies platform, witnessed a 34% rise in adjusted operating income during the third quarter. We believe that the strategic restructuring efforts undertaken at Industrial Process, Interconnect Solutions and Control Technologies over the past few months will result in substantial restructuring savings for the soon-to-be-reported quarter.
Morover, the company’s market expansion drive is likely to boost its fourth-quarter results. Presently, the company is focusing on expanding in the higher-margin aftermarket business by concentrating on low-cost technological solutions. During the third quarter, Motion Technologies grabbed higher market share through expanding its global automotive customer base. It also completed the Axtone buyout during the fourth quarter which is expected to be accretive to its earnings in the first full year after its closure.
Despite these positives, unfavorable oil prices have been acting as a major growth dampener for the company. Based on unfavorable oil price movement, the company foresees decline in revenues of the oil and gas segments for full-year 2016. As upstream oil projects are the most vulnerable to decline in oil and gas prices, the company estimates revenues to drop mainly due to project delays, lower capital expenditure on part of clients, high cost of projects and pricing pressures.
During third-quarter 2016, the company’s Interconnected Solutions and Industrial Process segments were hurt by weakness in the oil and gas sector, and mining project activity, combined with extended delays in maintenance spending. Concurrent with the third-quarter earnings release, ITT Inc. had slashed its top- and bottom-line guidance for full-year 2016, anticipating lower project profitability and unfavorable foreign exchange at Industrial Process.
In addition, constant strengthening of the U.S. dollar, lower short-cycle pump and project activity across all key end markets, are likely to play be major spoilsports for the fourth-quarter top-line performance.
Earnings Whispers
Our proven model does not conclusively show that ITT Inc. will beat earnings estimates in this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.
Zacks ESP: Earnings ESP for the company is currently pegged at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 42 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
ITT Inc. Price and EPS Surprise
ITT Inc. Price and EPS Surprise | ITT Inc. Quote
Zacks Rank: ITT Inc.’s Zacks Rank #3, when combined with 0.00% ESP, makes surprise prediction difficult.
Note that we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
DaVita HealthCare Partners Inc. (DVA - Free Report) has an Earnings ESP of +4.40% and a Zacks Rank #3. Additionally, on an average, the stock has recorded a positive surprise of almost 4.4% in the last four quarters.
The Cooper Companies (COO - Free Report) has an Earnings ESP of +2.69% and a Zacks Rank #2. The stock has posted a positive surprise of almost 6.32% for the trailing four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.
Exilixis, Inc. (EXEL - Free Report) has an Earnings ESP of +200.00% and a Zacks Rank #2. The stock had registered a whopping positive earnings surprise of 107.69% in the last reported quarter.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>