ITT Inc. ITT is poised to gain from strength across its segments. Strength across all short-cycle product categories, driven by growth in pump projects and Habonim valves business, is aiding the Industrial Process (IP) segment. Solid momentum in the general industrial end market bodes well for the segment’s aftermarket business. 

Growth in component and connector sales within the aerospace and defense markets is driving the Connect and Control Technologies (CCT) segment. Also, the acquisitions of kSARIA and Micro-Mode bode well for the segment. Strength in the friction OEM (original equipment manufacturer), aftermarket and KONI businesses is supporting 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 MT segment’s performance in the quarters ahead.

Acquisitions have been ITT's preferred mode of business expansion to date. The company completed the acquisition of kSARIA Parent, Inc., in September 2024, bolstering its connectivity solutions portfolio for the defense and aerospace sectors. This acquisition enhanced its technological capabilities and market reach. In January 2024, ITT acquired the privately held Svanehøj Group A/S for approximately $395 million, expanding its offerings in the marine pumps market. The May 2023 acquisition of Micro-Mode Products, Inc. boosted the company's product portfolio and customer base, particularly for long-term defense programs, while also strengthening its North American connectors platform and CCT segment.

ITT’s shareholder-friendly policies are praiseworthy. During the first nine months of 2024, the company paid out dividends of $78.7 million up 9.5% year over year. It also repurchased shares worth $104 million (up 73% year over year). Also, in 2023, the company’s dividend payments totaled $95.8 million and share repurchases were $60 million. The quarterly dividend rate was hiked 10% in February 2024.

In the past year, this Zacks Rank #3 (Hold) company’s shares have gained 25% against the industry’s 4.4% decline.

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Downsides of ITT

The company’s costs and expenses have been rising over the last several quarters, resulting in the contraction of margins. In the first nine months of 2024, the cost of sales increased 8.5% year over year due to rising raw material and labor costs. Sales and marketing expenses rose 15% year over year in the same period while general and administrative expenses increased 5.7%. If not checked, high raw material costs may affect margins and profitability in 2024.

ITT intends to become more competent on the back of overseas business expansion. It has operations in the United States and Canada; Europe, the Middle East, and Africa; the Asia Pacific and Latin America. However, this exposes the company to several economic, political and environmental headwinds as well as movement in foreign currencies.

Stocks to Consider

Better-ranked companies are discussed below.

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GHM delivered a trailing four-quarter average earnings surprise of 101.9%. In the past 60 days, the Zacks Consensus Estimate for Graham’s fiscal 2025 earnings has remained steady.

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In the past 60 days, the consensus estimate for GNRC’s 2024 earnings has increased 1.6%.

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In the past 60 days, the consensus estimate for AIT’s 2024 earnings has inched up 0.1%.

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