ITT Beats, Reiterates Guidance

Zacks

ITT Corporation (ITT) reported first quarter 2012 earnings per share from continuing operations of 39 cents, which was 21.8% above the Zacks Consensus Estimate.

However, earnings were down 13.3% year over year from 45 cents. The decline was primarily attributable to lower segment operating income due to post-spin incremental recurring costs, expected lower connectors volume and increased large project mix in the Industrial Process business.

On a GAAP basis, the company reported earnings of 11 cents, compared to a loss of 23 cents in the year ago quarter.

Total Revenue

Total revenue increased 8.3% to $577 million, compared to $533 million in the prior-year period. Organic revenue grew 9% for the quarter. Revenue was above the Zacks Consensus Estimate of $557 million.

The top line was driven by a 22% growth in emerging markets and 11% growth in North America, as well as gains in core markets such as oil and gas, mining, chemical and general industrial.

Segment Results

The Industrial Process segment reported revenue growth of 35% to $226 million, driven by growth in project shipments across all regions and markets, particularly in Latin America where revenue increased 71%. Quarterly revenue also included a $7 million benefit from Industrial Process' Blakers Pump Engineers, which ITT acquired in October 2011. Organic revenue was up 30% compared to the prior year.

Revenue at Motion Technologies contracted 2% year over year to $180 million due to weakness in the shock absorbers product lines. However, organic growth was up 2% thanks to gains in Europe and growth in emerging markets and North America. A strong performance from the automotive segment also contributed.

Interconnect Solutions' revenue for the year was $93 million, declining 1% from the prior year, primarily due to general weakness in the global connector industry combined with a decrease in  the communication market due to a customer's loss of market share. Organic revenue contracted 12% year over year.

In Control Technologies, revenue increased 1% to $79 million compared to the prior year, driven by growth in the aerospace and industrial segments which was almost fully offset by expected declines in defense and a lack of revenue from a prior-year rail seat project.

Income and Expenses

For the quarter, the company reported operating income of $37 million compared to a loss of $10 million in the prior-year quarter. This was driven by increased volume and strong operating productivity, partially offset by negative project mix shift and post-spin incremental recurring costs.

Balance Sheet & Cash Flow

At the end of the quarter, cash and cash equivalents was $728 million with long-term debt of $4 million and shareowner’s equity of $723 million.

Outlook

Concurrent with the full year earnings release, the company reiterated guidance for fiscal 2012. The company expects earnings in the range of $1.62 to $1.72 per share. Total revenue is expected to grow 5% to 7%, including expected market share gains as well as the impact of late-cycle strength in oil & gas and mining. The company also expects emerging markets to grow approximately 10% due to oil and gas in the Middle East and in South America, automotive gains in China and new global platforms and products.

The company currently holds a Zacks Rank # 3 which implies a short-term (1-3 months) ‘Hold’ rating on the stock.

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