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Here's Why You Should Avoid Betting on ITT Stock Right Now

Zacks Equity Research
·3 min read

ITT Inc. ITT has failed to impress investors with its recent operational performance, owing to difficult end-market conditions amid the coronavirus outbreak and other woes, which are expected to adversely impact its earnings.

The Zacks Rank #5 (Strong Sell) company has a market capitalization of $5 billion. In the past six months, it has lost 16.5% compared with the industry’s decline of 13.6%.



Let’s delve into the factors that might continue to take a toll on the firm.

Weak Demand Environment: In the quarters ahead, ITT anticipates to experience an adverse impact on its businesses on account of the coronavirus outbreak-led market downturn. Notably, the company believes that lower demand for brake pads will adversely impact its Motion Technologies segment. Also, weak prices for oil and gas as well as governmental restrictions, owing to the pandemic, remain concerning for the Industrial Process segment. In addition, its Connect and Control Technologies segment is likely to suffer from reduced demand for aftermarket and aerospace OEM components, and connectors.

Expected Low Working-Capital Generation: The company anticipates the operating income of its business segments to decline due to the coronavirus-led woes. Also, its working capital is expected to be hurt badly in 2020. This, in turn, will likely have negative impacts on ITT’s operating cash flows in the year.

Forex Woes: Given its widespread presence in international markets, the company is exposed to the unfavorable foreign currency movements. For instance, in first-quarter 2020, foreign exchange headwinds hurt its top-line performance by $12.4 million and also had an adverse impact of $12.7 million on orders.

Estimate Trend: In the past 30 days, analysts have increasingly become bearish on the company, as evident from negative earnings estimate revisions. Notably, the Zacks Consensus Estimate for its 2020 earnings has trended down from $2.85 to $2.54 on five downward estimate revisions against two upward revisions. In addition, over the same timeframe, the consensus estimate for 2021 earnings has trended down from $3.35 to $3.06 on four downward estimate revisions against two upward revisions.

Stocks to Consider

Some better-ranked stocks from the Zacks Industrial Products sector are Intellicheck, Inc. IDN, Alcoa Corporation AA and Broadwind Energy Inc. BWEN. All the companies currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Intellicheck delivered a positive earnings surprise of 70.24%, on average, in the trailing four quarters.

Alcoa delivered a positive earnings surprise of 12.78%, on average, in the trailing four quarters.

Broadwind delivered a positive earnings surprise of 50.00%, on average, in the trailing four quarters.

5 Stocks to Soar Past the Pandemic: In addition to the companies you learned about above, we invite you to learn about 5 cutting-edge stocks that could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of the decade.

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ITT Inc. (ITT) : Free Stock Analysis Report
Alcoa Corp. (AA) : Free Stock Analysis Report
Broadwind Energy, Inc. (BWEN) : Free Stock Analysis Report
Intellicheck Mobilisa, Inc. (IDN) : Free Stock Analysis Report
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Zacks Investment Research