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ITT (ITT) Hits Fresh High: Is There Still Room to Run?

Zacks Equity Research

Have you been paying attention to shares of ITT (ITT)? Shares have been on the move with the stock up 16.8% over the past month. The stock hit a new 52-week high of $70.85 in the previous session. ITT has gained 46.1% since the start of the year compared to the 30.8% move for the Zacks Conglomerates sector and the 30.8% return for the Zacks Diversified Operations industry.

What's Driving the Outperformance?

The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on November 1, 2019, ITT reported EPS of $0.97 versus consensus estimate of $0.9 while it beat the consensus revenue estimate by 0.4%.

For the current fiscal year, ITT is expected to post earnings of $3.72 per share on $2.84 billion in revenues. This represents a 15.17% change in EPS on a 3.52% change in revenues. For the next fiscal year, the company is expected to earn $3.98 per share on $2.95 billion in revenues. This represents a year-over-year change of 7.02% and 3.86%, respectively.

Valuation Metrics

ITT may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.

On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.

ITT has a Value Score of B. The stock's Growth and Momentum Scores are B and F, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 19X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 15.6X versus its peer group's average of 10.2X. Additionally, the stock has a PEG ratio of 1.9. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, ITT currently has a Zacks Rank of #2 (Buy) thanks to favorable earnings estimate revisions from covering analysts.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if ITT passes the test. Thus, it seems as though ITT shares could have a bit more room to run in the near term.

How Does ITT Stack Up to the Competition?

Shares of ITT have been moving higher, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also impressive, including Bunzl (BZLFY), Macquarie Infrastructure (MIC), and Carlisle Companies (CSL), all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.

The Zacks Industry Rank is in the top 33% of all the industries we have in our universe, so it looks like there are some nice tailwinds for ITT, even beyond its own solid fundamental situation.

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