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ITT (ITT) Up 5.1% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for ITT (ITT - Free Report) . Shares have added about 5.1% in that time frame, outperforming the S&P 500.

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 catalysts.

ITT Beats on Q3 Earnings & Revenues, Revises 2018 View

ITT reported better-than-expected results for third-quarter 2018.

Earnings/Revenues

Quarterly adjusted earnings came in at 82 cents per share, outpacing the Zacks Consensus Estimate of 79 cents. The bottom line also came in 24.2% higher than the year-ago tally.

Revenues in the reported quarter came in at $680.6 million, up 5.5% year over year. The top-line numbers also surpassed the Zacks Consensus Estimate of $671 million. Notably, the top line improved 7% year over year on an organic basis.





Segmental Break-Up

Third-quarter 2018 revenues of the company’s Industrial Process segment were $205 million, up 4.5% year over year. Quarterly revenues of the company’s Motion Technologies segment improved 3.4% year over year to $310.3 million. Connect & Control Technologies segment generated $166 million revenues in the reported quarter, up 11.1% year over year.

Costs/Margins

Cost of sales in the third quarter was $454.1 million, up 2.9% year over year. Gross profit margin was 33.3%, up 170 basis points (bps) year over year.

Sales and marketing expenses in the quarter came in at $40.8 million compared with $41.3 million recorded in the year-ago quarter. Adjusted operating margin improved 150 bps year over year to 15.7%.

Balance Sheet/ Cash Flow

Exiting the third quarter, ITT had cash and cash equivalents of $525.8 million, up from $389.8 million recorded as of Dec 31, 2017.

In the first nine months of 2018, the company generated $246.6 million cash from operating activities, higher than $178.3 million cash generated in the year-ago period. Free cash flow was $182.8 million, remarkably up from $99.1 million recorded during the first nine months of 2017.

Outlook

ITT is poised to grow on the back of robust end-market sales and greater operational efficacy. Nonetheless, foreign exchange pressures, escalating compensation costs and material price inflation remain causes of concern for the company. Based on the existing market conditions, the company has revised its organic revenue growth guidance for 2018 from 3-5% to 4-5%. Moreover, adjusted earnings view for the year has also been revised from $3.05-$3.15 per share to $3.13-$3.15 per share.

How Have Estimates Been Moving Since Then?

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

VGM Scores

Currently, ITT has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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 #2 (Buy). We expect an above average return from the stock in the next few months.




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