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Here's Why Investors Should Consider Buying ITT Stock Now

Zacks Equity Research

ITT Inc. ITT currently seems to be a smart choice for investors seeking exposure in multi-sector companies. Solid fundamentals and positive earnings estimate revisions are reflective of healthy growth potential of the company.

The New York City-based company currently carries a Zacks Rank #2 (Buy). It belongs to the Zacks Diversified Operations industry, which is currently at the top 35% (with the rank of 88) of more than 250 Zacks industries.

We believe that the industry is poised to gain from healthy demand from the defense and governmental arenas, higher global demand for air travel plus technological upgrade in manufacturing processes, and infrastructure development. Additionally, changes in the country’s tax policies, governmental development plans and growth in the manufacturing activities are boons for multi-sector companies.

Below we discussed why investing in ITT will be a smart choice.

Share Price Performance, Earnings Outlook: Market sentiments seem to be working in favor of the company over time. Year to date, its shares have gained 50.3%, while an increase of 18.1% has been recorded in the past three months. The three-month performance compares favorably with the industry’s 7.1% growth.




Notably, the company’s financial performance in the last four quarters was better than expected. In the third quarter of 2019, its earnings surpassed the Zacks Consensus Estimate by 7.78% and grew 18.3% from the year-ago quarter. The bottom-line results benefited from solid sales and improved adjusted operating income.
 
In the quarters ahead, the company expects the bottom line to gain from increase in sales volume, cost containment, operational execution and supply-chain actions. For 2019, it raised earnings per share projection to $3.73-$3.75 from $3.58-$3.68 stated previously.

In the past 60 days, earnings estimates for 2019 and 2020 have been revised upward, reflecting positive sentiments about the company’s growth prospects. Currently, the consensus estimate for earnings is pegged at $3.72 for 2019 and $3.98 for 2020, suggesting growth of 3% and 3.4% from the respective 60-day-ago figures.

ITT Inc. Price and Consensus

 

ITT Inc. Price and Consensus

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

Top-Line Prospects: The company has a diverse customer base in oil & gas, transportation, and industrial end markets. It offers products — including industrial flow equipment, motion control products, vibration and shock equipment, electronic connectors, energy absorption products, and others. Such diversification is a boon for ITT.

Also, the company stands to gain from innovation investments and focus on the commercialization of market-leading technologies.

In third-quarter 2019, its sales grew 4.5% year over year or rose 4% on an organic basis. For 2019, the company expects 3-5% year-over-year organic revenue growth.

Buyouts: ITT has been benefiting from acquired assets. In the first nine months of 2019, buyout investments amounted to $113.1 million.
 
In May 2019, the company acquired Rheinhutte Pumpen Group. Since acquired, Rheinhutte Pumpen Group has helped in strengthening ITT’s Industrial Process segment’s portfolio of engineered industrial pump technologies. Also, ITT acquired Matrix Composites in July 2019. The buyout has been boosting aerospace product offerings of ITT’s Connect and Control Technologies segment.

Shareholder-Friendly Policies: The company remains committed to rewarding shareholders handsomely through dividend payments and share buybacks. During the first nine months of 2019, it bought back shares worth $38.3 million and distributed dividends worth $26.1 million.

Notably, the company hiked its quarterly dividend payout by 10% in February 2019. Also, a $25-million share buyback program was authorized in the same month. Further, the company announced a $40 million worth share repurchase program in October 2019 and received its board of director’s approval for a $500-million indefinite-term share buyback program.

Other Key Picks

Some other top-ranked stocks are Tennant Company TNC, DXP Enterprises, Inc DXPE and Macquarie Infrastructure Company MIC. While Tennant currently sports a Zacks Rank #1 (Strong Buy), DXP Enterprises and Macquarie Infrastructure carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, earnings estimates for these companies have improved for the current year.

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