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01/11 03:45
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call highlights strong financial performance, strategic acquisitions, and market expansion. Positive developments include successful product launches, significant revenue growth, and strong order growth in key sectors like aerospace and defense. Despite some margin pressures and project delays, the overall sentiment is positive due to strong execution and strategic pricing actions. The shareholder return plan, including share repurchases, also adds a positive note. However, concerns about Q4 visibility and margin impacts from M&A costs slightly temper the outlook.
Orders $1 billion, up 16% total and 13% organic year-over-year. Growth driven by strong order intake across all businesses, bolstered by kSARIA and Svanehøj acquisitions.
Revenue Record quarterly revenue of more than $970 million, up 7% total and 4% organic year-over-year. Growth contributed by all segments.
Operating Income Grew more than twice the organic sales growth rate, with operating margin expanding over 100 basis points excluding M&A. Growth attributed to profitable growth and operational improvements.
Adjusted EPS Grew 10% year-over-year or 16% excluding the Wolverine divestiture. Growth driven by profitable growth and operational improvements.
Free Cash Flow $214 million year-to-date, with a free cash flow margin of 14% in Q2. Growth attributed to strong cash collections, inventory management, and customer advances in the project business.
Industrial Process Orders Grew 22% year-over-year, driven by strength in Goulds Pumps and Svanehøj.
Connect & Control Orders Grew 9% organic and 36% total year-over-year, driven by defense and commercial aerospace awards.
Motion Technologies Orders Friction team won 49 new electrified platform awards, contributing to growth.
Backlog Nearly $2 billion, up 34% year-over-year and 9% sequentially.
Industrial Process Revenue Grew 5% organically year-over-year, driven by project strength and a 43% growth in Svanehøj.
Connect & Control Revenue Grew 4% organically year-over-year, driven by defense momentum and aerospace demand.
Motion Technologies Revenue Friction OE grew 7% organically year-over-year, outperforming global auto production in all geographies.
Operating Margin Grew 30 basis points to 18.4% year-over-year, driven by higher volumes, pricing actions, and operational improvements.
Industrial Process Margin Grew 100 basis points to nearly 22%, driven by volume, productivity, and price.
Motion Technologies Margin Grew 140 basis points year-over-year, driven by productivity savings, despite 100 basis points of unfavorable FX impact.
Connect & Control Margin Grew 270 basis points year-over-year, excluding M&A dilution, driven by strategic pricing actions.
VIDAR compact motor: Launched with variable speed capabilities for energy efficiency and reliability. Secured over $1 million in orders and deployed in trials at two major oil companies.
Geopolymer brake pads: Progressed towards commercialization with unique and patented technology.
High-pressure fuel pump by Svanehøj: Demonstrated superior durability in lab tests and operational vessels.
Industrial Process (IP): Grew 22% in orders, driven by Goulds Pumps and Svanehøj. Svanehøj achieved $200 million in orders in the first half of 2025, surpassing full-year 2024 revenue.
Connect & Control Technologies (CCT): Grew 9% organically in orders, driven by defense and aerospace. kSARIA secured over 25% growth in orders, including defense platforms like Abrams tank.
Motion Technologies (MT): Won 49 new electrified platform awards with OEMs in China, Europe, and North America, including Mercedes-AMG and BYD.
Margin Expansion: Operating margin grew 30 basis points to 18.4%, with significant contributions from productivity and pricing actions.
Cash Flow: Free cash flow reached $214 million year-to-date, with a 14% margin in Q2.
Efficiency in Friction China: Achieved over 90% plant efficiency despite frequent production line stops for validations.
M&A Activity: Progressed acquisition targets and integrated recent acquisitions like Svanehøj and kSARIA, which are performing well.
Share Repurchase: Repurchased $500 million in shares year-to-date, reducing share count by 3%.
Foreign Currency Transaction Costs: The company faced headwinds from foreign currency transaction costs, which impacted profitability.
M&A Amortization Costs: Temporary M&A amortization costs from recent acquisitions like kSARIA and Svanehøj affected margins, though these are expected to cease in the near future.
Competitive Pricing Pressures: Aggressive pricing by competitors, particularly in the bidding phase for projects, poses a challenge to maintaining market share and profitability.
Tariff Costs: The company anticipates gross tariff costs of approximately $25 million in 2025, which requires mitigation through pricing and productivity actions.
Supply Chain and Production Efficiency: The need to stop production lines for process validations in China impacted overall plant efficiency, although the company managed to maintain high efficiency levels.
Economic and Market Volatility: The company noted a less volatile environment but remains cautious about economic uncertainties that could impact demand and operations.
Integration of Acquisitions: The integration of recent acquisitions like kSARIA and Svanehøj requires rigorous execution to ensure they meet performance and profitability expectations.
Full Year Adjusted EPS Outlook: ITT raised its full year adjusted EPS outlook to $6.45 at the midpoint, representing 10% growth versus the prior year or 13% growth excluding the lost earnings from the 2024 Wolverine divestiture.
Revenue Growth: Total revenue growth for 2025 is now expected to be 5% to 7%, with organic revenue growth remaining within the original range of 3% to 5%. The company anticipates continued growth in the project business in Industrial Process (IP), firm demand in aerospace and defense, and outperformance in friction OE and rail.
Operating Margin: Adjusted operating margin is expected to be approximately 18.4% at the midpoint, up 60 basis points versus the prior year. Excluding M&A, margin expansion is expected to exceed 100 basis points for the year.
Free Cash Flow: ITT expects to deliver close to $0.5 billion of free cash flow in 2025, supported by higher operating income and improving working capital.
Q3 2025 Outlook: Double-digit revenue growth is expected, with low single-digit organic growth. Operating margin is anticipated to increase slightly year-over-year, with EPS growth in the low teens year-over-year, slightly above Q2.
2030 Financial Targets: ITT aims for more than 5% organic revenue growth and approximately 10% total growth annually. Margin is targeted to reach 23%, representing over 500 basis points of expansion compared to 2024. Adjusted EPS is expected to exceed $11 from existing businesses and more than $12 including anticipated M&A. Free cash flow margin is projected to reach 14% to 15%.
Share Repurchase: To round out the highlights, we repurchased $500 million of ITT shares year-to-date, reaffirming our confidence in the long-term outlook of ITT and lowering our weighted average share count by 3%. On capital deployment, an incredibly strong cash performance, which put us in a position to act quickly to repurchase $400 million of ITT shares in April and May alone. We also repurchased $0.5 billion of ITT shares through May, which lowered our weighted average share count by 3%.
The earnings call presents a strong financial outlook with raised EPS guidance, double-digit revenue growth, and improved margins. The Q&A session highlighted strategic M&A opportunities and strong demand in key regions, contributing to a positive sentiment. The company's proactive approach in addressing challenges such as chip shortages and pricing dynamics further supports a positive stock price outlook. Despite some management ambiguity on M&A timing, the overall sentiment remains positive due to strong financial metrics and optimistic guidance.
The earnings call highlights strong financial performance, strategic acquisitions, and market expansion. Positive developments include successful product launches, significant revenue growth, and strong order growth in key sectors like aerospace and defense. Despite some margin pressures and project delays, the overall sentiment is positive due to strong execution and strategic pricing actions. The shareholder return plan, including share repurchases, also adds a positive note. However, concerns about Q4 visibility and margin impacts from M&A costs slightly temper the outlook.
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