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Why Is ITT Inc (ITT) Down 4.3% Since the Last Earnings Report?
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A month has gone by since the last earnings report for ITT Inc. (ITT - Free Report) . Shares have lost about 4.3% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
ITT Inc. Earnings & Revenues Beat Estimates in Q4
ITT Inc. posted adjusted earnings of $0.48 per share in fourth-quarter 2016, comfortably beating the Zacks Consensus Estimate of $0.42 by 14.3%. However, the figure was down 17% from the year-ago tally.
The bottom-line decline is largely attributable to higher tax rate and lower segment operating income. Moreover, tepid sales proved to be a drag.
For full-year 2016, the company’s adjusted earnings per share fell by 9% to $2.32. However, the figure also steered past the projected range of $2.20–$2.30. While improved efficiency and cost containment actions proved to be tailwinds, this was more than offset by lackluster segment operating income. Also, currency headwinds and higher tax rate proved to be a drag on the bottom line.
Inside the Headlines
ITT Inc.’s fourth-quarter revenues came in at $588.4, down 11.8% on a year-over-year basis. However, the metric surpassed the Zacks Consensus Estimate of $551 million.
Organic revenues decreased 10% year over year. Persistent weakness in the oil & gas sector, and mining markets played spoilsport. Moreover, currency fluctuations and softness in chemical & industrial pump business compounded the top-line decline.
For full-year 2016, the top line descended 3% to 2,405.4 million, largely attributable to foreign currency headwinds.
In terms of segments, Industrial Process revenues plunged 29% year over year to $212 million. In addition, organic revenues fell 28%. Challenging conditions in the oil & gas sector, mining, chemical & industrial markets, as well as softness in short-cycle pumps and aftermarket businesses, weighed down the sales performance of this segment. Also, currency fluctuations added to the woes.
Revenues at the Interconnect Solutions segment were down 6% year over year to $80.0 million. In addition, organic revenues shrunk by 6% on a year-over-year basis. Decline in oil and gas market activity, along with weakness in aerospace and defense businesses, proved to be a drag on the segment’s performance.
Control Technologies revenues fell 2% to $70 million on a year-over-year basis. Declines in aerospace and defense markets more than offset the improvements in industrial volumes, leading to the overall decline.
Motion Technologies revenues jumped 8% year over year to $228 million. Furthermore, organic revenues rose 10%. Significant share gains and market growth in automotive brake pads from stellar sales to both OEM and aftermarket customers proved conducive to the top-line improvement. Also, higher sales of seals and shims at Wolverine supplemented the sales of this segment.
ITT Inc.’s adjusted segment operating income declined about 16% year over year to $66 million, mainly hit by lower pump volumes in the Industrial Process business, prior-year post-retirement related benefits and pricing headwinds.
Axtone Acquisition
On Jan 26, 2017, ITT Inc. completed the buyout of customized components manufacturer – Axtone. During the third quarter, the company had entered into a definitive agreement to buy the components provider for railway and other harsh-environment industrial markets.
ITT Inc. believes that this acquisition will be complimentary to its KONI brand. This, in turn, will fortify its foothold in the transportation industry – including railway, aerospace and automotive. Precisely, this strategic buyout will boost ITT Inc.’s thriving Motion Technologies business and aid it gain a higher share in profitable aftermarkets. ITT projects the deal to be accretive to its earnings in the first full year of operations after its conclusion.
Liquidity and Cash Flow
As of Dec 31, 2017, the company had cash and cash equivalents of $460.7 million, up from $415.7 million in the year-ago quarter.
For the twelve-month period ended Dec 31, 2016, net cash from operating activities totaled $240.7 million compared with $229.7 million in the prior-year period.
Share Repurchase and Dividend
During the year, ITT Inc. returned about $114 million to shareholders by executing $70 million of share repurchases.
Additionally, subsequent to the end of the quarter, the company announced a 3% hike in dividend to $0.128 per share. Moving ahead, it has plans of targeting up to $65 million of share repurchases.
2017 Guidance
Concurrent with the fourth-quarter 2016 results, ITT Inc. offered its guidance for full-year 2017. Total revenue is expected to see a decline of around 2% or increase up to 2%. Adjusted EPS is projected to be in the band of $2.18–$2.48 per share, which is flat at the midpoint but up 1%, excluding the impact of foreign exchange compared to the year-earlier figure.
While global friction share gains and benefits from the Axtone buyout are likely to bolster top-line performance; this is likely to be offset by lower pump volumes, pricing pressures and foreign currency headwinds.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.
At this time, ITT Inc's stock has an average Growth Score of 'C', though it is lagging a lot on the momentum front with an 'D'. However, the stock was allocated a grade of 'B' on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than growth investors.
Outlook
The stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.
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Why Is ITT Inc (ITT) Down 4.3% Since the Last Earnings Report?
A month has gone by since the last earnings report for ITT Inc. (ITT - Free Report) . Shares have lost about 4.3% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
ITT Inc. Earnings & Revenues Beat Estimates in Q4
ITT Inc. posted adjusted earnings of $0.48 per share in fourth-quarter 2016, comfortably beating the Zacks Consensus Estimate of $0.42 by 14.3%. However, the figure was down 17% from the year-ago tally.
The bottom-line decline is largely attributable to higher tax rate and lower segment operating income. Moreover, tepid sales proved to be a drag.
For full-year 2016, the company’s adjusted earnings per share fell by 9% to $2.32. However, the figure also steered past the projected range of $2.20–$2.30. While improved efficiency and cost containment actions proved to be tailwinds, this was more than offset by lackluster segment operating income. Also, currency headwinds and higher tax rate proved to be a drag on the bottom line.
Inside the Headlines
ITT Inc.’s fourth-quarter revenues came in at $588.4, down 11.8% on a year-over-year basis. However, the metric surpassed the Zacks Consensus Estimate of $551 million.
Organic revenues decreased 10% year over year. Persistent weakness in the oil & gas sector, and mining markets played spoilsport. Moreover, currency fluctuations and softness in chemical & industrial pump business compounded the top-line decline.
For full-year 2016, the top line descended 3% to 2,405.4 million, largely attributable to foreign currency headwinds.
In terms of segments, Industrial Process revenues plunged 29% year over year to $212 million. In addition, organic revenues fell 28%. Challenging conditions in the oil & gas sector, mining, chemical & industrial markets, as well as softness in short-cycle pumps and aftermarket businesses, weighed down the sales performance of this segment. Also, currency fluctuations added to the woes.
Revenues at the Interconnect Solutions segment were down 6% year over year to $80.0 million. In addition, organic revenues shrunk by 6% on a year-over-year basis. Decline in oil and gas market activity, along with weakness in aerospace and defense businesses, proved to be a drag on the segment’s performance.
Control Technologies revenues fell 2% to $70 million on a year-over-year basis. Declines in aerospace and defense markets more than offset the improvements in industrial volumes, leading to the overall decline.
Motion Technologies revenues jumped 8% year over year to $228 million. Furthermore, organic revenues rose 10%. Significant share gains and market growth in automotive brake pads from stellar sales to both OEM and aftermarket customers proved conducive to the top-line improvement. Also, higher sales of seals and shims at Wolverine supplemented the sales of this segment.
ITT Inc.’s adjusted segment operating income declined about 16% year over year to $66 million, mainly hit by lower pump volumes in the Industrial Process business, prior-year post-retirement related benefits and pricing headwinds.
Axtone Acquisition
On Jan 26, 2017, ITT Inc. completed the buyout of customized components manufacturer – Axtone. During the third quarter, the company had entered into a definitive agreement to buy the components provider for railway and other harsh-environment industrial markets.
ITT Inc. believes that this acquisition will be complimentary to its KONI brand. This, in turn, will fortify its foothold in the transportation industry – including railway, aerospace and automotive. Precisely, this strategic buyout will boost ITT Inc.’s thriving Motion Technologies business and aid it gain a higher share in profitable aftermarkets. ITT projects the deal to be accretive to its earnings in the first full year of operations after its conclusion.
Liquidity and Cash Flow
As of Dec 31, 2017, the company had cash and cash equivalents of $460.7 million, up from $415.7 million in the year-ago quarter.
For the twelve-month period ended Dec 31, 2016, net cash from operating activities totaled $240.7 million compared with $229.7 million in the prior-year period.
Share Repurchase and Dividend
During the year, ITT Inc. returned about $114 million to shareholders by executing $70 million of share repurchases.
Additionally, subsequent to the end of the quarter, the company announced a 3% hike in dividend to $0.128 per share. Moving ahead, it has plans of targeting up to $65 million of share repurchases.
2017 Guidance
Concurrent with the fourth-quarter 2016 results, ITT Inc. offered its guidance for full-year 2017. Total revenue is expected to see a decline of around 2% or increase up to 2%. Adjusted EPS is projected to be in the band of $2.18–$2.48 per share, which is flat at the midpoint but up 1%, excluding the impact of foreign exchange compared to the year-earlier figure.
While global friction share gains and benefits from the Axtone buyout are likely to bolster top-line performance; this is likely to be offset by lower pump volumes, pricing pressures and foreign currency headwinds.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.
ITT Inc. Price and Consensus
ITT Inc. Price and Consensus | ITT Inc. Quote
VGM Scores
At this time, ITT Inc's stock has an average Growth Score of 'C', though it is lagging a lot on the momentum front with an 'D'. However, the stock was allocated a grade of 'B' on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than growth investors.
Outlook
The stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.