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Why Is ITT Up 4.6% Since Its Last Earnings Report?

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It has been about a month since the last earnings report for ITT Inc. (ITT - Free Report) . Shares have added about 4.6% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is ITT due for a pullback? 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's Q1 Earnings & Revenues Beat Estimates, 2018 View Up

ITT posted adjusted earnings of 77 cents per share in first-quarter 2018, surpassing the Zacks Consensus Estimate of 73 cents. The reported figure also improved 20.3% from the year-ago tally of 64 cents.

The impressive bottom-line performance can be primarily attributable to the company’s initiatives to drive operational improvements. Also, solid improvement in revenues along with robust market growth strategies in key global-end markets contributed to the upside.   

Inside the Headlines

In the reported quarter, revenues came in at $689.3 million, up 10.1% on a year-over-year basis. The top-line figure also outpaced the Zacks Consensus Estimate of $676 million. The year-over-year improvement in revenues was owing to strength in Motion Technologies, led by strong performances in global OEM automotive brake pads as well as growth in the China high-speed rail market. Additionally, strength in petrochemical and general industrial markets contributed significantly to the improvement. On a year-over-year basis, organic revenues also increased 2% driven by strength in emerging markets and transportation.

Segment-wise, Industrial Process revenues were up 2% year over year to $190 million. The upside came on the back of growth in aftermarket service, partly offset by project declines in the oil and gas markets.

Total revenues at the Connect and Control Technologies segment increased 3% to $158 million. However, organic revenues were flat in the reported quarter. Strength in commercial aerospace and increase in demand for electric vehicle as well as oil and gas connectors reflected well in the segment’s performance. Notably, this segment was formed by integrating the Interconnect Solutions and Control Technologies segments for streamlining operations, capitalizing on shared infrastructure and driving long-term growth in target markets.

Motion Technologies revenues continued with the strong momentum and increased 19% year over year to $342 million. Also, organic revenues rose 4%. Meanwhile, solid growth in global OEM automotive brake pads as well as impressive performance by China’s high-speed rail market proved conducive to the segment. In addition, favorable impact of foreign exchange and Axtone acquisition drove the top line at this segment.

ITT’s adjusted segment operating income advanced 22% year over year to a record $103 million. This uptick was mainly driven by strong productivity, higher volumes, restructuring benefits, improved performance on pump projects and favorable impacts of foreign exchange.

Liquidity

As of Mar 31, 2018, the company had cash and cash equivalents of $439.9 million (including restricted cash), significantly up from $349.5 million in the year-ago quarter.

2018 Guidance

Concurrent with the first-quarter earnings release, ITT raised mid-point of its 2018 adjusted EPS guidance, projected earlier. The company anticipates adjusted EPS in the range of $2.95-$3.15 compared with the previous guidance of $2.85-$3.15. The upward revision was backed by stable market dynamics as well as improved operational execution.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There have been two revisions lower for the current quarter.

ITT Inc. Price and Consensus

VGM Scores

At this time, ITT has a great Growth Score of A, though it is lagging a bit on the momentum front with a B. Following the exact same course, 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is more suitable for growth investors than those looking for value and momentum.

Outlook

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




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