ITT Inc. ITT is well-poised for growth in the coming quarters, courtesy of strength across its segments and strong operational execution. The company's efforts to reward its shareholders handsomely add to its appeal.

Based in New York, ITT is a global leader in multiple high-technology engineering and manufacturing industries. It engages in the design, manufacture and sale of a wide range of engineered products and services.

ITT currently carries a Zacks Rank #3 (Hold). In the past year, the stock has gained 31.2% against the industry’s 9% decline.

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Let’s discuss the factors that should influence investors to retain this company for the time being.

Business Strength: ITT is benefiting from strength across its segments. It is gaining from higher sales volume and robust order growth. The Industrial Process (IP) segment is benefiting from strength across all short-cycle product categories, driven by growth in pump projects and Habonim valves business. Strength in the general industrial end market is aiding the segment’s aftermarket business. The acquisition of Svanehøj also bodes well for the segment. Growth in component and connector sales within the aerospace and defense markets is aiding the Connect and Control Technologies (CCT) segment. Also, the acquisitions of kSARIA and Micro-Mode augur well for the segment.

Solid momentum in the friction OEM (original equipment manufacturer) aftermarket and KONI businesses is driving the Motion Technologies (MT) segment. Strong demand for the company’s brake components and specialized sealing solutions, shock absorbers and damping technologies in OEM and rail transportation markets is likely to drive the segment’s performance in the quarters ahead.

Expansion Initiatives: ITT solidifies its product portfolio and leverages business opportunities through asset additions. In September 2024, it acquired kSARIA Parent, Inc. The acquisition will enhance its portfolio of connectivity solutions for the defense and aerospace end markets, technological capabilities and market reach, driving growth and operational efficiency. The January 2024 acquisition of privately held Svanehøj Group A/S (Svanehøj) for approximately $395 million expanded ITT’s offerings, particularly in the marine pumps market. 

The acquisition of Micro-Mode Products, Inc. in May 2023 expanded ITT's product portfolio and customer base, specifically for long-term defense programs. It also grew its North America connectors platform, enhancing the CCT segment. The company acquired Clippard Instrument Laboratories’ product lines in August 2022. The stainless steel, brass and aluminum cylinders, and volume tanks contributed by this acquisition expanded ITT’s compact automation product range targeting the robotics, packaging and automation end markets. The acquisitions of Svanehøj and kSARIA contributed 7% to the company’s sales growth in third-quarter 2024.

Rewards to Shareholders: ITT has a strong balance sheet that has enabled it to reward its shareholders handsomely through dividend payments and share buybacks. During the first nine months of 2024, the company paid out dividends of $78.7 million (up 9.5% year over year) and repurchased shares worth $104 million (up 73% year over year). Also, in 2023, dividend payments totaled $95.8 million and share repurchases were $60 million. The quarterly dividend rate was hiked 10% in February 2024.

Downsides of ITT

High Costs: ITT has been dealing with the negative impact of high operating costs and expenses over time. In the first nine months of 2024, the cost of sales rose 8.5% year over year. While sales and marketing expenses rose 15% year over year in the same period, general and administrative expenses increased 5.7%. High raw material costs may affect margins and profitability in 2024.

Forex Woes: ITT's international presence keeps it exposed to the risk of adverse currency fluctuations. This is because a strengthening U.S. dollar is likely to require the company to either raise prices or contract profit margins in locations outside the United States. Thus, adverse currency movements are a worry. In the third quarter of 2024, foreign currency translation hurt sales by 0.2%.

Stocks to Consider

Some better-ranked companies are discussed below:

Federal Signal Corporation FSS presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

FSS delivered a trailing four-quarter average earnings surprise of 11.8%. In the past 60 days, the Zacks Consensus Estimate for Federal Signal’s 2024 earnings has increased 3.1%.

Kadant Inc. KAI presently carries a Zacks Rank of 2. It has a trailing four-quarter average earnings surprise of 17.2%. 

The Zacks Consensus Estimate for KAI’s 2024 earnings has increased 1.8% in the past 60 days.

RBC Bearings Incorporated RBC presently carries a Zacks Rank of 2. The company delivered a trailing four-quarter average earnings surprise of 2.5%.

In the past 60 days, the consensus estimate for RBC’s fiscal 2025 earnings has increased 0.5%.

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