A month has gone by since the last earnings report for ITT (ITT Quick QuoteITT - Free Report) . Shares have lost about 5.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is ITT due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

ITT Q1 Earnings Meet Estimates, Revenues Top, Orders Rise Y/Y

ITT’s first-quarter 2022 earnings came in line with the Zacks Consensus Estimate of 97 cents while sales beat the same by 4.1%.

ITT’s adjusted earnings in the reported quarter were 97 cents per share, matching the consensus mark. The bottom line declined 8.5% from the year-ago figure of $1.06. Inflation in raw material and overhead costs had adverse impacts.

Revenue Details

In the quarter under review, ITT’s net sales were $726.2 million, reflecting a year-over-year increase of 4%. The upside was primarily attributable to a 6.8% increase in organic sales. In the reported quarter, total orders were $812.1 million, increasing 11% year over year. The metric increased 14% on an organic basis.

ITT’s revenues beat the Zacks Consensus Estimate of $698 million.

ITT currently reports under three business segments: Industrial Process, Motion Technologies, and Connect and Control Technologies.

The segmental information is briefly discussed below:

Revenues from Industrial Process totaled $202.2 million, almost flat with $202.3 million reported in the previous year’s quarter. This was primarily attributable to a 2% increase in organic sales. Supply-chain challenges adversely impacted ITT’s energy and chemical business in the quarter. Orders increased 23% year over year on an organic basis.

Revenues from Motion Technologies totaled $370.1 million, reflecting year-over-year growth of 0.3%. The results grew from a 4% increase in organic sales. Supply-chain constraints affected the operations of the automotive OEM businesses. Orders grew 3% from the year-ago quarter’s level on an organic basis.

Revenues from Connect and Control Technologies totaled $154.6 million, up 21.4% year over year and up 23%, organically. Results benefited from strength in the industrial, defence and commercial aerospace end markets. Orders expanded 28% year over year on an organic basis.

Margin Profile

In the quarter, ITT’s cost of revenues increased 8.2% year over year to $507.8 million. The same represented 70% of the quarter’s sales compared with 67.2% in the year-ago quarter. Gross profit decreased 4.6% to $218.4 million, and as a percentage of sales, it was 30.1%.

General and administrative expenses increased 4% year over year to $60.4 million while sales and marketing expenses rose 4.6% to $38.4 million. Research and development expenses inched up 2.9% to $25 million.

Adjusted segmental operating income in the quarter decreased 5% year over year to $116 million. Margin decreased 150 basis points (bps) to 16%. Supply-chain woes, inflation in raw material costs and expenses were a spoilsport. However, results benefited from higher sales volume and pricing actions.

Balance Sheet and Cash Flow

Exiting first-quarter 2022, ITT had cash and cash equivalents of $710.4 million, up 9.7% from $647.5 million in the previous quarter. Its commercial paper and current maturities of long-term debt were $487.0 million, while total non-current assets were $1,821.1 million.

In the first three months of 2022, ITT used $2.7 million for its operating activities compared to net cash generation of $70.8 million in the previous year’s quarter. Capital expenditure was $30 million, up from $17.2 million in the previous year’s quarter. Free cash outflow was $32.7 million against an inflow of $53.6 million a year ago.

In the first three months, ITT paid out dividends of $22.4 million, up from $19.1 million in the previous year’s quarter. Share repurchases were $186 million, up from shares worth $61 million bought back in the first three months of 2021.

Outlook

For 2022, ITT anticipates adjusted earnings of $4.30-$4.70 per share. The projection suggests growth of 6-16% from the year-ago reported figure.

Revenues are expected to increase 7-9% year over year and 9-11% organically. Adjusted segmental operating margin is predicted to increase 40-130 bps year over year to 17.6-18.5%. Free cash flow is expected to be $250-$300 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, ITT has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, ITT has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

ITT is part of the Zacks Diversified Operations industry. Over the past month, Danaher (DHR Quick QuoteDHR - Free Report) , a stock from the same industry, has gained 1.7%. The company reported its results for the quarter ended March 2022 more than a month ago.

Danaher reported revenues of $7.69 billion in the last reported quarter, representing a year-over-year change of +12.1%. EPS of $2.76 for the same period compares with $2.52 a year ago.

For the current quarter, Danaher is expected to post earnings of $2.35 per share, indicating a change of -4.5% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.2% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Danaher. Also, the stock has a VGM Score of C.