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ITT Q4 Earnings Surpass Estimates, Revenues Miss, Orders Up Y/Y

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ITT Inc. ITT reported mixed fourth-quarter 2021 results, wherein earnings surpassed estimates by 1%, but sales missed the same by 2.2%.

The company’s adjusted earnings in the reported quarter were $1.06 per share, surpassing the consensus estimate of $1.05. Also, the bottom line improved 5% from the year-ago figure of $1.01. Share buybacks aided the results (by 1 cent per share). However, inflation in raw material and supply-chain woes had adverse impacts.

In 2021, the company’s earnings came in at $4.05, an increase of 26.6% on a year-over-year basis.

Revenue Details

In the quarter under review, ITT’s net sales were $685.4 million, reflecting a year-over-year decline of 3.3%. The decline was primarily attributable to a 2.1% decrease in organic sales. In the reported quarter, total orders were $722.2 million, increasing 8.6% year over year. The metric increased 9.9% on an organic basis.

The company’s revenues lagged the Zacks Consensus Estimate of $701 million.

It currently reports under three business segments — Industrial Process, Motion Technologies and Connect and Control Technologies. The segmental information is briefly discussed below:

Revenues from Industrial Process totaled $216.3 million, declining 5.3% year over year. The decline was primarily attributable to a 3.9% decrease in organic sales. Supply-chain challenges adversely impacted the company’s projects business in the quarter. Orders increased 39.2% year over year on an organic basis.

Revenues from Motion Technologies totaled $323.6 million, reflecting a year-over-year fall of 8.1%. The results suffered from a 7.2% decline in organic sales. Supply-chain challenges affected the operations of the company’s Friction and Wolverine businesses. Orders fell 6.6% from the year-ago quarter on an organic basis.

Revenues from Connect and Control Technologies totaled $145.8 million, increasing 13% year over year and up 14.3% organically. Results benefited from strength in the industrial, transportation and commercial aerospace end markets. Orders expanded 13.5% year over year on an organic basis.

In 2021, the company’s net sales came in at $2,765 million, up 11.6% year over year.

ITT Inc. Price, Consensus and EPS Surprise

ITT Inc. Price, Consensus and EPS Surprise
ITT Inc. Price, Consensus and EPS Surprise

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

Margin Profile

In the quarter, ITT’s cost of revenues decreased 5.8% year over year to $461.5 million. It represented 67.3% of the quarter’s sales compared with 69.2% in the year-ago quarter. Gross profit increased 2.4% to $223.9 million, and as a percentage of sales, it was 32.7%.

General and administrative expenses fell 7.6% year over year to $46.1 million, while sales and marketing expenses increased 7.3% to $38.4 million. Research and development expenses jumped 5.5% to $24.9 million.

Adjusted segmental operating income in the quarter increased 3.8% year over year to $124.7 million. Margin expanded 130 basis points (bps) to 18.2%. Results benefited from lower costs and expenses. However, supply-chain woes, inflation in raw material costs, woes related to growth investments and other headwinds played spoilsport.

Balance Sheet and Cash Flow

Exiting 2021, ITT had cash and cash equivalents of $647.5 million, up 10.5% from $585.8 million in the previous quarter. Its commercial paper and current maturities of long-term debt were $197.6 million, while total non-current assets were $1,843.3 million.

In 2021, ITT used $8.4 million for its operating activities against net cash generation of $435.9 million in the previous year. Capital expenditure was $88.4 million, up from $63.7 million in the previous year. Free cash outflow was $96.8 million against an inflow of $372.2 million a year ago.

In 2021, the company paid out dividends of $75.8 million, up from $59 million in the previous year. Share repurchases were $116.5 million, up from shares worth $84.2 bought back in 2020.

Concurrent with the earnings release, ITT announced that its board of directors approved a 20% hike in the quarterly dividend rate. It now stands at 26.4 cents per share, higher than the previous rate of 22 cents. The company will pay out the revised amount on Apr 4, 2022, to shareholders on record as of Mar 9.

Outlook

For 2022, the company anticipates adjusted earnings of $4.30-$4.70 per share, up from $4.01-$4.06 per share mentioned earlier. The revised projection suggests year-over-year growth of 6-16%.

Revenues are expected to increase 7-9% year over year and 9-11% organically. Adjusted segmental operating margin is predicted to increase 40-130 bps year over year to 17.6-18.5%. Free cash flow is expected to be $300-$325 million.

Zacks Rank & Stocks to Consider

The company currently carries a Zacks Rank #3 (Hold).

Some better-ranked companies are discussed below.

AZZ Inc. AZZ presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Its earnings surprise for the last four quarters was 16.90%, on average.

AZZ’s earnings estimates increased 2.3% for fiscal 2022 (ending February 2022) and 3.7% for fiscal 2023 (ending February 2023) in the past 30 days. Its shares have lost 13.4% in the past three months.

Franklin Electric Co., Inc. FELE presently carries a Zacks Rank #2. Its earnings surprise in the last four quarters was 16.27%, on average.

In the past 30 days, Franklin Electric’s earnings estimates have been stable for both 2021 (results are awaited) and 2022. FELE’s shares have lost 8.2% in the past three months.

SPX FLOW, Inc. FLOW presently carries a Zacks Rank #2.

SPX FLOW’s earnings estimates have increased 0.3% for 2022 in the past 30 days. FLOW’s shares have gained 7.6% in the past three months.


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Franklin Electric Co., Inc. (FELE) : Free Stock Analysis Report

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