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ITT's Q4 Earnings & Revenues Surpass Estimates, Increase Y/Y

Zacks Equity Research

ITT Inc. ITT reported strong fourth-quarter 2019 results wherein both earnings and revenues surpassed the Zacks Consensus Estimate. Following this upside, the company’s share price gained 3.4% to eventually close at $71.19 on Friday Feb 21.

In fourth-quarter 2019, the company pulled off a positive earnings surprise of 7.6%. Quarterly adjusted earnings came in at 99 cents per share, outpacing the Zacks Consensus Estimate of 92 cents. The bottom line also improved 20.7% from the year-ago figure.

In 2019, the company’s adjusted earnings were $3.81 per share, up 18% year over year.

Revenues of $719.1 million were up 6% year over year. The top line also surpassed the consensus mark of $714 million by 0.7%. Also, revenues rose 4% on an organic basis.

In 2019, ITT reported revenues of $2,846.4 million, up 3.7% on a year-over-year basis.

ITT Inc. Price, Consensus and EPS Surprise

ITT Inc. Price, Consensus and EPS Surprise

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

Segmental Breakup

Fourth-quarter revenues of Industrial Process were $255.2 million, up 11.4% year over year. Organic sales climbed 4%, driven by an increase in pump projects and a strong short-cycle business on account of baseline pump strength and higher service activity.

Quarterly revenues of Motion Technologies ascended 4.5% year over year to $304.4 million. Organic sales increased 7% in the quarter, mainly on account of Friction OEM growth, partially offset by softness in the Wolverine business. However, forex woes had a3% adverse impact on sales.

Connect & Control Technologies generated $160.8 million revenues, up 1.4% year over year. Organic sales dipped 2% due to lower defense components as well as industrial and aerospace sales.

Costs/Margins

Cost of sales in the fourth quarter was $491.1 million, up 4.9% year over year. Sales and marketing expenses were $41.4 million compared with $40.5 million in the year-ago quarter.

Gross profit margin was 31.7%, up 70 basis points (bps).

Income tax expenses were $16.8 million, up from $15.3 million.

Balance Sheet/Cash Flow

Exiting the fourth quarter, ITT had cash and cash equivalents of $612.1 million, up from $561.2 million as of Dec 31, 2018.

In 2019, the company generated $357.7 million cash from operating activities, lower than $371.8 million recorded in the previous year. Capital expenditure totaled $91.4 million, declining from $95.5 million spent in 2018. Adjusted free cash flow was $318.8 million, up from $308.9 million.

Dividend Hike

Concurrent with the earnings release, the company announced a 15% hike in quarterly dividend to 16.9 cents per share. The raised dividend will be paid out on Apr 6, 2020 to its shareholders of record as of Mar 16.

Outlook

Based on the existing market conditions, the company anticipates total revenues from a 3% decline to 1% increase for 2020. Adjusted earnings view for the year is set at $3.72-$4.02 per share, indicating growth of 1.6% at the midpoint from the year-ago reported figure.

Zacks Rank & Key Picks

ITT currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks are Graco Inc. GGG, Dover Corporation DOV and Griffon Corporation GFF. While Graco sports a Zacks Rank #1 (Strong Buy), Dover and Griffon carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Graco delivered a trailing four-quarter positive earnings surprise of 0.40%, on average.

Dover delivered a positive earnings surprise of 5.36%, on average, over the trailing four quarters.

Griffon came up with a beat of 20.34%, on average, in the last four quarters.

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