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ITT's Matrix Composites Buyout Expands Aerospace Business

Zacks Equity Research

ITT Inc. ITT yesterday announced that it acquired Rockledge, FL-based Matrix Composites, Inc. for approximately $29 million. This move is in sync with the company’s growth policies.

Before we proceed further with the buyout details, it is worth mentioning that Matrix Composites specializes in manufacturing aerospace components. It is expected to generate revenues of $22 million in 2019.

Details of the Buyout

As noted, ITT funded the transaction value of $29 million with cash. The acquired assets will be part of the company’s Connect and Control Technologies segment. The segment engages in designing and manufacturing harsh-environment connector solutions, and critical energy absorption and flow control components. It primarily caters to customers in aerospace and defense, general industrial, medical, and oil & gas markets. The segment generated roughly 23.7% of ITT’s revenues in the first quarter of 2019.

The company believes that the buyout will infuse new strength to the Connect and Control Technologies segment’s aerospace product offerings as well as help in solidifying its technological capabilities and add 115 skilled people to its employee base. Earnings accretion from the buyout is predicted in the first year.

A Glimpse of ITT’s Inorganic Initiatives

We believe that the above-mentioned transaction is consistent with ITT’s policy of acquiring businesses for attracting more customers, and gaining access to various regions and product lines.

In May 2019, the company successfully completed the acquisition of Germany-based Rheinhutte Pumpen Group. The buyout will strengthen ITT’s Industrial Process segment, especially its portfolio of engineered industrial pump technologies. ITT expects the acquisition to be accretive to earnings in the initial year of its completion.

Zacks Rank & Stocks to Consider

With a market capitalization of $5.7 billion, the company currently carries a Zacks Rank #3 (Hold). ITT anticipates gaining from strengthening commercial aerospace, mining, chemical and defense businesses. However, high cost of sales and forex woes are the main concerns.

In the past 60 days, earnings estimates for the company have remained unchanged at $3.61 for 2019 and $3.98 for 2020. These estimates reflect year-over-year growth of 11.8% for 2019 and 10.2% for 2020.

ITT Inc. Price and Consensus


ITT Inc. Price and Consensus

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

The company’s share price has gained 7.9% in the past three months compared with growth of 0.5% recorded by the industry.

Some better-ranked stocks in the industry are Carlisle Companies Incorporated CSL, Crane Co. CR and Honeywell International Inc. HON. All these stocks currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past 60 days, earnings estimates for Carlisle Companies and Crane have improved for the current year while remained unchanged for Honeywell. Further, average earnings surprise for the last four quarters was positive 19.07% for Carlisle Companies, 6.74% for Crane and 3.50% for Honeywell.

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