ITT to Benefit From Business Strength Despite Headwinds
ITT Inc. ITT is poised to benefit from strength across its Friction technologies and Connectors businesses and the global automotive market recovery. Growth in pump projects within oil and gas, chemical, and general industrial markets coupled with the company’s focus on operational execution is also likely to drive its performance in the quarters ahead. For 2021, it anticipates organic sales to grow in the range of 8-10% on a year-over-year basis.
The company intends to become more competent on the back of innovation investments. In October 2020, it unveiled its Value Line of QUIETPATH aftermarket brand brake shim and abutment clip materials. Several investments made to upgrade its ITT Smart Pad and expand manufacturing automation capabilities are expected to be beneficial. It has also been investing in key markets, including electric vehicle, and expanded its state-of-the-art Friction research & development center.
It remains committed to rewarding shareholders handsomely through dividend payments and share buybacks. In the first half of 2021, it paid out dividends worth $38.1 million to shareholders and repurchased shares worth $61.4 million. In February 2021, the company hiked the quarterly dividend rate by 30%.
However, the company has been experiencing high cost of sales and operating expenses, over time. In second-quarter 2021, its cost of sales jumped 33% on a year-over-year basis. For 2021, ITT expects higher raw material costs to negatively impact its margins and profitability. For the year, it anticipates incurring capital expenditure of $100 million, which might affect its short-term liquidity.
Given its widespread presence in international markets, the company is exposed to unfavorable foreign currency movements.
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Year to date, this Zacks Rank #3 (Hold) stock has gained 19% compared with the industry’s growth of 23.4%.
Stocks to Consider
Some better-ranked stocks from the same space are Raven Industries, Inc. RAVN, Carlisle Companies Incorporated CSL and Crane Co. CR. While Raven currently sports a Zacks Rank #1 (Strong Buy), Carlisle and Crane carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Raven pulled off a positive earnings surprise of 42.59%, on average, in the trailing four quarters.
Carlisle pulled off a positive earnings surprise of 39.38%, on average, in the trailing four quarters.
Crane pulled off a positive earnings surprise of 19.54%, on average, in the trailing four quarters.
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