ITT Corporation (ITT) reported strong first-quarter fiscal 2014 results, with quarterly earnings (excluding one-time items) of 62 cents a share which surpassed the Zacks Consensus Estimate of 52 cents by 19.2% and were up 32% year over year.
Profits during the quarter were primarily driven by increased volume, strong net operational productivity and restructuring benefits which were partially offset by growth investments and negative pricing and mix.
Total Revenue
Total revenue in the quarter surged 10.9% to $674.5 million from $608.2 million in the prior-year period. Organic revenue for the quarter grew 10% while emerging markets posted a 15% increase. Revenues also surpassed the Zacks Consensus Estimate of $645 million.
The increase in top line primarily reflects growth in industrial pumps for the chemical and oil and gas markets, automotive brake pad market share gains and aftermarket expansion. Further, the company also reported market share gains across strategic connector end markets.
Segment Results
The Industrial Process segment reported revenues of $285.5 million, reflecting an 11.2% increase. Organic revenues grew 13%, driven by strong growth in global chemical project pumps, oil and gas project pumps in key end markets and mining process pumps in Latin America and North America, as well as favourable timing of certain large, long-term pump projects. However, orders for the segment were down 5.3%.
Revenues in the Motion Technologies segment surged 12.7% to $217.8 million, while organic revenues were up 9%. The increase was driven by OEM share gains and market growth in China and Europe, automotive aftermarket growth and strong performance by the shock absorber business. Orders during the quarter were up 14.3% year over year.
Interconnect Solutions’ organic revenues grew 10%. Revenues also shot up 10% to $100 million for the quarter. The increase was driven by growth in aerospace and defence, general industrial and oil and gas connectors. Orders for the segment rose 7.9% during the quarter
In the Control Technologies segment, revenues increased 6.3% to $72.9 million while organic revenues also rose 6%. The increase was driven by growth in aerospace components and general industrial solutions, primarily in energy absorption, partially offset by softness in the defence market and the negative impact of an end-of-life aerospace program. Orders for the segment declined 3.6% year over year during the quarter.
Income and Expenses
Exiting the quarter, the company reported operating income of $48.3 million compared with $37.2 million in the prior-year quarter. The increase was primarily due to higher sales.
Operating margin expanded 104 basis points to 7.2% during the quarter, driven by net operating productivity and increased volume.
Balance Sheet & Cash Flow
At the end of the quarter, cash and cash equivalents were $515.1 million with no long-term debt. The company had shareholder’s equity of $1.2 billion. Net cash from operating activities was $227 million. Capital expenditures were $19 million.
Outlook
Concurrent with the full-year earnings release, the company reiterated its revenue guidance but raised its earnings guidance for fiscal 2014. ITT expects total and organic revenue to be up 4% to 6%, resulting in an increase of $2.6 billion to $2.65 billion. Adjusted earnings per share from continuing operations are now expected in the range of $2.28 to $2.36 compared with $2.23 to $2.33 per share mentioned earlier.
Revenue growth is expected to be driven by share gains and growth in global oil and gas pump as well as automotive markets, partially offset by non-strategic connector product lines and an aerospace program ramp down.
ITT currently carries a Zacks Rank #3 (Hold). Some other companies operating in the same sector that are worth considering at the moment are AVT, Inc. (AVTC), Plug Power Inc. (PLUG) and AO Smith Corp. (AOS), all carrying a Zacks Rank #2 (Buy).
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