ITT reports solid 2017 first-quarter results
Raises 2017 EPS guidance midpoint
- Revenue up 3% to $626 million
- Segment operating income up 9%
- EPS up to $0.52
- Organic revenue up 2%; Organic orders up 7%
- Segment operating income up 3%, including unfavorable FX of $4 million
- EPS up 8% to $0.64
WHITE PLAINS, N.Y., May 8, 2017 – ITT Inc. (NYSE: ITT) today reported solid 2017 first-quarter financial results that reflect the company’s ability to leverage the benefits from proactive restructuring and continuous operational improvement while advancing share gains and market growth in key global end markets and deploying capital to enhance its global platforms.
On a GAAP basis, the company delivered revenue of $626 million, a 3 percent increase, and an organic revenue (defined as total revenue excluding foreign exchange, acquisition and divestiture impacts) increase of 2 percent, as solid growth in transportation – driven by automotive, aerospace and defense – was partially offset by project declines in oil and gas, reflecting weak backlog entering the year. Organic orders grew 7% in the first quarter primarily due to a large oil and gas project win and significant automotive share gains in Europe and China.
GAAP segment operating income increased 9 percent and adjusted segment operating income increased 3 percent, reflecting incremental restructuring benefits, higher volumes and improved productivity. These gains were partially offset by $4 million of unfavorable foreign exchange, higher commodity costs and strategic investments to support continued long-term automotive platform wins. Excluding foreign exchange, adjusted segment operating income increased 8 percent. GAAP segment operating income also benefited from lower restructuring and acquisition-related costs.
GAAP EPS increased $0.10 to $0.52 and adjusted EPS, which excludes special items, increased $0.05 to $0.64, as segment operating income growth, favorable corporate costs and improved efficiency were partially offset by $1 million of unfavorable impacts from foreign exchange. Excluding foreign exchange, adjusted EPS grew 10 percent, despite a 150 basis point increase in the tax rate.
For a reconciliation of GAAP to non-GAAP results, please refer to www.itt.com/investors or click here.
“ITT delivered a solid first quarter as we continued our intense focus on optimizing execution across the enterprise while advancing our essential long-term growth plans,” said CEO and President Denise Ramos. “We demonstrated our executional capability in accomplishments ranging from successfully leveraging the benefits of our structural reset at Industrial Process, to driving solid operational improvements at our connector facilities, to improving productivity and efficiency across the enterprise.
“We also simplified our structural framework by strategically combining two of our segments to create Connect and Control Technologies, which will give us new opportunities to optimize operations and leverage shared resources and talent to enhance our long-term growth in the global aerospace and industrial markets. All of this work is being enhanced by our new Chief Operating Officer structure, which is driving more robust processes and performance across the enterprise.
“In addition, we continued to expand in key end markets such as automotive and aerospace, while leveraging recent acquisitions to strengthen our global platforms. We drove significant order growth in automotive in Europe and China, in global oil and gas pumps and connectors, and in heavy vehicle connectors in Asia. In addition, we are on track with the integration of our recent Axtone Railway Components acquisition and are continuing to strategically deploy our capital to both position ITT for long-term success and to create value for shareowners.”
New Connect and Control Technologies Segment
The Connect and Control Technologies (CCT) segment was formed by combining the company’s Interconnect Solutions and Control Technologies businesses to align operations, leverage shared infrastructure and drive long-term growth in common target markets. CCT designs and manufactures harsh-environment connectors and critical energy absorption and flow control components primarily for the aerospace and defense, and industrial markets. Reconciliations of historical CCT quarterly data are available at www.itt.com/investors or click here.
2017 First-Quarter Business Segment Results
All quarterly results are compared with the respective prior-year periods.
Industrial Process designs and manufactures industrial pumps and valves for the chemical, industrial, oil and gas, and mining markets.
- Total revenue and organic revenue decreased 11 percent to $186 million, reflecting growth in short-cycle baseline pumps and service that was more than offset by large project declines, primarily in oil and gas due to weak backlog entering the year, as well as slower aftermarket parts activity.
- GAAP operating income decreased 19 percent to $7 million, and adjusted segment operating income decreased 18 percent to $10 million. Both measures primarily reflect lower project volumes across key markets, increased negative impacts from pump projects with a high degree of engineering and manufacturing complexity, and $1 million of unfavorable foreign exchange, which were partially offset by incremental restructuring benefits and improved operational execution.
Motion Technologies designs and manufactures braking technologies, shock absorbers and specialized sealing solutions for the automotive and rail markets.
- Total revenue increased 12 percent to $287 million, and organic revenue increased 10 percent, reflecting significant share gains and market growth in automotive brake pads in Europe and China, improved aftermarket, and strength in sealing solutions at Wolverine. Total revenue includes $8 million of unfavorable foreign exchange and incremental revenue of $14 million from the acquisition of Axtone Railway Components.
- GAAP operating income increased 8 percent to $55 million, and adjusted segment operating income increased 5 percent to $56 million. Both increases reflect strong volume growth, partially offset by commodity costs, pricing pressures, $2 million of unfavorable foreign exchange and $3 million of strategic investments to support continued long-term platform wins in North America.
Connect and Control Technologies designs and manufactures harsh-environment connectors and critical energy absorption and flow control components primarily for the aerospace and defense and industrial markets.
- Total revenue increased 6 percent to $153 million, and organic revenue increased 7 percent. Both increases reflect stronger general industrial, defense, and oil and gas connector activity.
- GAAP operating income increased 32 percent to $16 million and areflect higher volumes and improved operational efficiencies in connector facilities and incremental restructuring benefits, partially offset by incremental costs related to environmental control systems.
The company is maintaining its previously announced 2017 full-year revenue guidance in the range of down 2 percent to up 2 percent vs. the prior year, and it is raising the midpoint of its previous GAAP and adjusted EPS guidance by $0.05. The updated EPS guidance reflects an increase at the low end and a tightening of the previous ranges due to solid results in the first quarter and an improved operational outlook, partially offset by additional foreign exchange and commodity headwinds.
Investor Call Today
ITT's senior management will host a conference call for investors today at 9 a.m. ET to review performance and answer questions. The briefing can be monitored live via webcast at the following address on the company's Web site: www.itt.com/investors and will be available on the website from two hours after the webcast until Monday, May 22, 2017, at midnight.
All references to EPS are defined as diluted earnings per share from continuing operations.