ITT Corporation (ITT) reported strong third-quarter fiscal 2014 results with adjusted earnings of 66 cents a share, which surpassed the Zacks Consensus Estimate of 60 cents by 10%. Earnings also improved 22.2% compared with the prior-year adjusted figure of 54 cents.
The increase in earnings was driven by strong operational performance, accelerated business execution and steady progress in implementation of the company’s strategies like its Lean transformation initiative. This apart, the company has strategically diversified its portfolio to augment its profitability.
Total Revenue
Total revenue in the quarter climbed 3.6% year over year to $657.1 million. Organic revenue for the quarter grew 4%. However, revenues missed the Zacks Consensus Estimate of $666 million.
The upside in top line primarily reflects strong growth in oil and gas markets, automotive brake pad market share gains and aftermarket expansion. Further, the company also reported market share gains across end markets. The emerging markets posted a 14% increase, with 15% growth in energy and 6% growth in transportation markets recording 15% and 6% year over year increase, respectively.
Segment Results
The Industrial Process segment reported revenues of $293 million, reflecting a 3% increase. Revenue growth was driven by strength in oil and gas project pumps in North America, Latin America and the Middle East. However, weakness in chemical and industrial pumps and valves, and mining pumps in Asia and Latin America partially offset the gains.
Revenues in the Motion Technologies segment surged 11% to $197 million. The increase was driven by automotive brake pad share gains in China and growth in Europe. This apart, continued strong performance by the shock absorber business in global rail and automotive end markets remained a positive.
Interconnect Solutions’ revenues rose 5% to $98 million in the quarter. The improvement was supported by growth in oil and gas connectors in North America and general industrial connectors. However, continued weakness in defense and communication connectors partially offset the gains. Moreover, an expected decline in non-strategic connectors remained a headwind.
In the Control Technologies segment, revenues inched up 1% to $71 million. The increase was driven by growth in demand for general industrial solutions, especially in energy absorption and aerospace components, partially hurt by the impact of a high-margin end-of-life aerospace program and sluggishness in defense. The company’s ongoing commercial aerospace program witnessed an improvement of 7% in the quarter.
Income and Expenses
The company reported operating income of $119.7 million compared with $77 million in the prior-year quarter. The increase was primarily led by higher sales and benefits from the re-measurement of the company’s asbestos liability. The operating margins surged a robust 230 basis points year over year to 14.4%.
The company’s selling, general and administrative costs came in at $122.6 million, down from $125.2 million reported in the prior-year quarter. The Research and development expenditure increased to $20.1 million compared with $16.1 million in the year-ago quarter.
Balance Sheet & Cash Flow
At the end of the quarter, the company had cash and cash equivalents of $522.6 million and shareholders equity of $1.3 billion.
For the nine-month period ended Sep 30, 2014, net cash from operating activities totaled $131.9 million while capital expenditures stood at $74.4 million.
Outlook
Encouraged with the strong third-quarter earnings, the company raised its earnings guidance for fiscal 2014. Adjusted earnings per share from continuing operations are presently expected in the range of $2.42 to $2.47 compared with the prior range of $2.38 to $2.46 per share.
The company also revised its guidance for total revenues to the range of 5% to 6% from the earlier provided projection of 5% to 7%, whereas the organic revenue guidance was reaffirmed at 5% to 6%.
Zacks Rank
ITT currently has a Zacks Rank #4 (Sell). Some better-ranked stocks include CLARCOR Inc. (CLC), Compass Diversified Holdings (CODI) and Noble Group Ltd. (NOBGY), each carrying a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment