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ITT Exhibits Bright Prospects Amid Pandemic-Led Headwinds

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On Apr 7, we issued an updated research report on ITT Inc. (ITT - Free Report) .

In the past three months, this Zacks Rank #3 (Hold) stock has returned 13% compared with the industry’s growth of 5.9%.

Present Scenario

ITT is poised to gain from its diversified business operations, operational execution and sound capital deployment policy. For 2021, the company expects organic sales to grow 2-4% on a year-over-year basis, supported by strength in its Friction technologies business as well as the auto market recovery.

Also, the company’s healthy liquidity position helps it tide over the difficult operating conditions caused by the coronavirus outbreak. Exiting 2020, the company’s total available liquidity was $1.6 billion (including the available cash balance).

ITT remains committed toward rewarding shareholders through share-repurchase programs and dividend payouts. In 2020, the company paid out dividends worth $59 million to shareholders, apart from repurchasing shares worth $73.2 million. In addition, in February 2021, it hiked the quarterly dividend rate by 30%.

Further, certain cost-reduction measures implemented by ITT are likely to help it in maintaining a healthy margin performance amid the pandemic. Notably, in 2020, the company executed more than $100 million of cost actions, including $65 million in structural cost reductions and $40 million of discretionary expense reductions.

However, the lingering effects of the pandemic are likely to continue affecting its performance in the first quarter of 2021. Notably, the company expects weakness in short-cycle business, along with low bookings across chemical, oil and gas as well as commercial aerospace end markets to continue weighing on its near-term top-line performance.

Further, given its widespread presence in international markets, ITT is exposed to the unfavorable foreign currency movements. For instance, in fourth-quarter 2020, foreign-exchange headwinds had an adverse impact of 0.3% on the revenues of the Industrial Process segment.

Key Picks

Some better-ranked stocks are Heritage-Crystal Clean, Inc , Griffon Corporation (GFF - Free Report) and Honeywell International Inc. (HON - Free Report) . While Heritage-Crystal currently sports a Zacks Rank #1 (Strong Buy), Griffon and Honeywell carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Heritage-Crystal delivered a positive earnings surprise of 74.45%, on average, in the trailing four quarters.

Griffon delivered a positive earnings surprise of 115.48%, on average, in the trailing four quarters.

Honeywell delivered a positive earnings surprise of 7.35%, on average, in the trailing four quarters.

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