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ITT's Asbestos Liabilities Removed With InTelCo Divestiture

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ITT Inc. (ITT - Free Report) yesterday announced the divestment of its wholly-owned subsidiary, InTelCo Management LLC to Wilmington, DE-based Delticus HoldCo, L.P. Notably, ITT’s shares gained 2.37% yesterday, ending the trading session at $93.76.

Delticus is a portfolio company of a private equity firm, Warburg Pincus LLC. It primarily engages in the acquisition and management of various forms of corporate liabilities. Services offered result in the transfer of risks related to corporate liabilities through corporate sale.

Inside the Headlines

Notably, ITT’s InTelCo holds the company’s legacy asbestos liabilities as well as insurance assets related to it. It was formed in 2016 by ITT. Notably, InTelCo received cash of $398 million from ITT at the time of closing of the divestment.

The divestment has helped ITT to let go of its legacy asbestos liabilities, and related insurance assets and deferred tax assets. The company believes that the disposition will help strengthen its financial and operational efficiencies as well as its balance sheet and focus on core businesses.

As a result of the divestment, ITT expects to incur $27 million of after-tax loss (one time in nature) in second-quarter 2021. Notably, the impact of the loss will be excluded from the company’s adjusted earnings per share.

Exiting the first quarter of 2021, ITT had asbestos-related liabilities of $818.3 million, down 2.7% from the previous quarter, and asbestos-related assets of $330.8 million, representing a sequential decline of 6.5%. Deferred tax assets at the end of the said quarter were $156.3 million, down 1.3% from the previous quarter.

Zacks Rank, Price Performance and Estimate Trend

With a market capitalization of $7.9 billion, the company currently carries a Zacks Rank #2 (Buy). A diversified business structure, innovation investments and cost-saving measures are likely to aid it in the quarters ahead. The company anticipates adjusted earnings of $3.80-$4.00 per share and revenue growth of 8-10% in 2021. Organic sales in the year are expected to increase 5-7%. Free cash flow is predicted to be $300-$320 million.

In the past three months, the company’s stock has gained 1.3% compared with the industry’s growth of 6.6%.

 

Zacks Investment ResearchImage Source: Zacks Investment Research

 

The Zacks Consensus Estimate for ITT’s earnings is pegged at $3.96 for 2021 and $4.52 for 2022, reflecting growth of 6.7% and 5.6% from the 60-day-ago figures. Also, the consensus estimate for second-quarter 2021 earnings of 88 cents per share reflects growth of 1.1% from the 60-day-ago figure.

ITT Inc. Price and Consensus

 

ITT Inc. Price and Consensus

ITT Inc. price-consensus-chart | ITT Inc. Quote

Other Stocks to Consider

Three other top-ranked stocks in the industry are Griffon Corporation (GFF - Free Report) , Crane Co. (CR - Free Report) and 3M Company (MMM - Free Report) . All the companies presently carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past 60 days, earnings estimates for the companies have improved for the current year. Also, earnings surprise for the last reported quarter was 50.00% for Griffon, 26.72% for Crane and 23.11% for 3M.

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