ITT Inc. (ITT) Bundle
Understanding ITT Inc. (ITT) Revenue Streams
Understanding ITT Inc.’s Revenue Streams
In the fiscal year 2024, ITT Inc. reported a total revenue of $885.2 million for the third quarter, marking a year-over-year increase of 7.7% from $822.1 million in Q3 2023. For the nine months ended September 28, 2024, total revenue reached $2.7017 billion, up 10.1% from $2.4539 billion in the same period of 2023.
Breakdown of Primary Revenue Sources
The revenue streams for ITT Inc. can be categorized into three primary segments:
- Motion Technologies: Revenue of $344.9 million in Q3 2024, down 4.1% from $359.5 million in Q3 2023.
- Industrial Process: Revenue of $333.8 million in Q3 2024, up 19.3% from $279.8 million in Q3 2023.
- Connect & Control Technologies: Revenue of $207.2 million in Q3 2024, an increase of 12.6% from $184.0 million in Q3 2023.
| Segment | Q3 2024 Revenue (in millions) | Q3 2023 Revenue (in millions) | Year-over-Year Change (%) |
|---|---|---|---|
| Motion Technologies | $344.9 | $359.5 | -4.1% |
| Industrial Process | $333.8 | $279.8 | +19.3% |
| Connect & Control Technologies | $207.2 | $184.0 | +12.6% |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth has shown notable trends:
- Q3 2024: Total revenue increased by 7.7%
- First Nine Months 2024: Total revenue increased by 10.1%
Contribution of Different Business Segments to Overall Revenue
The contributions of each segment to the overall revenue in Q3 2024 were as follows:
- Motion Technologies: 39.0%
- Industrial Process: 37.7%
- Connect & Control Technologies: 23.3%
Analysis of Significant Changes in Revenue Streams
Significant changes in revenue streams were driven by various factors:
- The divestiture of the Wolverine business negatively impacted Motion Technologies by $31.4 million in Q3 2024.
- Acquisitions, particularly the Svanehøj acquisition, contributed $40 million to Industrial Process revenue growth in Q3 2024.
- Higher sales volumes and pricing actions across all segments contributed to an overall increase in revenue.
A Deep Dive into ITT Inc. (ITT) Profitability
Profitability Metrics
Gross Profit Margin: For the three months ended September 28, 2024, the gross profit was $314.0 million with a gross margin of 35.5%, compared to a gross profit of $279.4 million and a margin of 34.0% for the same period in 2023. For the nine months ended September 28, 2024, gross profit was $930.9 million with a margin of 34.5%, up from a gross profit of $821.3 million and a margin of 33.5% in the prior year.
Operating Profit Margin: Operating income for the three months ended September 28, 2024, was $207.9 million, resulting in an operating margin of 23.5%, an increase from 17.4% in the same quarter of 2023. For the nine months ended September 28, 2024, operating income reached $516.1 million, with an operating margin of 19.1%, compared to $409.4 million and a margin of 16.7% for the same period in 2023.
Net Profit Margin: Net income attributable to the company for the three months ended September 28, 2024, was $161.1 million, achieving a net profit margin of 18.2%, compared to $110.8 million and a margin of 13.5% in the prior year quarter. For the nine months ended September 28, 2024, net income was $391.3 million, with a net profit margin of 14.5%, compared to $319.0 million and a margin of 13.0% in the same period of 2023.
Trends in Profitability Over Time
The following table summarizes the key profitability metrics over the last two years:
| Period | Gross Profit ($ million) | Gross Margin (%) | Operating Income ($ million) | Operating Margin (%) | Net Income ($ million) | Net Margin (%) |
|---|---|---|---|---|---|---|
| Q3 2024 | 314.0 | 35.5 | 207.9 | 23.5 | 161.1 | 18.2 |
| Q3 2023 | 279.4 | 34.0 | 143.1 | 17.4 | 110.8 | 13.5 |
| 9M 2024 | 930.9 | 34.5 | 516.1 | 19.1 | 391.3 | 14.5 |
| 9M 2023 | 821.3 | 33.5 | 409.4 | 16.7 | 319.0 | 13.0 |
Comparison of Profitability Ratios with Industry Averages
The company’s profitability ratios are compared with industry averages as follows:
| Metric | Company (2024) | Industry Average |
|---|---|---|
| Gross Margin (%) | 35.5% | 32.0% |
| Operating Margin (%) | 23.5% | 18.5% |
| Net Margin (%) | 18.2% | 15.0% |
Analysis of Operational Efficiency
The operational efficiency of the company has improved significantly over the past year, primarily due to effective cost management strategies. The operating expenses for Q3 2024 were $106.1 million, a decrease of 22.2% from $136.3 million in Q3 2023. This led to a substantial increase in the operating income.
Additionally, the operating expense to revenue ratio improved from 16.6% in Q3 2023 to 12.0% in Q3 2024, indicating better cost control relative to revenue growth.
Overall, the trends in gross margin and operational efficiency reflect positively on the company's profitability metrics and operational performance in 2024.
Debt vs. Equity: How ITT Inc. (ITT) Finances Its Growth
Debt vs. Equity: How ITT Inc. Finances Its Growth
As of September 28, 2024, ITT Inc. reported a total debt of $1,323 million, which is comprised of both long-term and short-term debts. The breakdown is as follows:
| Type of Debt | Amount (in millions) |
|---|---|
| Long-term Debt | $1,200 |
| Short-term Debt | $123 |
The company's debt-to-equity ratio stands at 0.48, which is below the industry average of approximately 1.0. This indicates a conservative approach to using debt for financing growth compared to its peers.
In terms of recent debt activity, ITT Inc. has engaged in refinancing efforts to optimize its capital structure. The company issued $200 million in new debt in early 2024 to finance its acquisitions, which included the purchase of Svanehøj. The credit rating for ITT Inc. is currently rated at Baa1 by Moody's, reflecting a stable outlook.
To balance its financing strategies, ITT Inc. has maintained a healthy mix of debt and equity. The total equity reported as of September 28, 2024, is $2,755.7 million, providing a solid foundation for leveraging additional debt when necessary.
The following table summarizes the financial metrics relevant to ITT Inc.'s debt and equity structure:
| Metric | Value |
|---|---|
| Total Debt | $1,323 million |
| Total Equity | $2,755.7 million |
| Debt-to-Equity Ratio | 0.48 |
| Recent Debt Issuance | $200 million |
| Credit Rating | Baa1 |
Assessing ITT Inc. (ITT) Liquidity
Assessing ITT Inc.'s Liquidity
Current and Quick Ratios
The current ratio for ITT Inc. as of September 28, 2024, stood at 1.58, calculated by dividing current assets of $2,010.8 million by current liabilities of $1,274.7 million. The quick ratio, which excludes inventories from current assets, is approximately 1.25, using quick assets of $1,390.3 million (current assets minus inventories of $620.5 million) over the same current liabilities.
Analysis of Working Capital Trends
Working capital as of September 28, 2024, is $736.1 million, reflecting an increase from $819.9 million at December 31, 2023. This indicates a shift in liquidity management, with an increase in current assets outpacing current liabilities. The working capital ratio demonstrates a consistent ability to cover short-term obligations.
Cash Flow Statements Overview
The consolidated cash flow statements reveal the following trends for the nine months ended September 28, 2024:
| Cash Flow Activity | 2024 (in million $) | 2023 (in million $) |
|---|---|---|
| Net Cash from Operating Activities | 339.4 | 367.6 |
| Net Cash from Investing Activities | (794.6) | (142.0) |
| Net Cash from Financing Activities | 432.0 | (345.2) |
| Net Change in Cash and Cash Equivalents | (28.0) | (130.2) |
Potential Liquidity Concerns or Strengths
Despite a slight decrease in cash from operations, the company maintains a healthy cash position with $460.9 million in cash and cash equivalents as of September 28, 2024. However, a significant increase in cash used for investing activities, primarily due to acquisitions totaling $864.8 million, raises potential liquidity concerns. The company’s ability to manage its financing strategy effectively, with a net cash inflow from financing activities of $432.0 million, mitigates some of these concerns.
Overall, ITT Inc. demonstrates solid liquidity through its current and quick ratios, working capital management, and cash flow operations, although strategic monitoring of investing activities will be essential moving forward.
Is ITT Inc. (ITT) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will analyze key valuation ratios, stock price trends, dividend metrics, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The trailing twelve-month (TTM) P/E ratio is currently 28.0. This indicates how much investors are willing to pay for every dollar of earnings. A P/E ratio above the industry average could suggest overvaluation.
Price-to-Book (P/B) Ratio
The P/B ratio stands at 3.5, which is above the industry average of 2.0. This suggests that the market values the company significantly higher than its book value, a potential indicator of overvaluation.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The current EV/EBITDA ratio is 12.5, compared to the industry average of 10.0. This higher ratio may signify that the company is overvalued relative to its earnings before interest, taxes, depreciation, and amortization.
Stock Price Trends
Over the last 12 months, the stock price has shown a positive trend, starting at $85.00 and increasing to a current price of $136.76. This represents an increase of approximately 60.5%.
Dividend Yield and Payout Ratios
The current dividend yield is 2.3%, with a payout ratio of 20% based on earnings. This suggests that the company has room to increase dividends while maintaining a healthy balance between reinvesting in the business and returning value to shareholders.
Analyst Consensus on Stock Valuation
Analyst consensus indicates a rating of Hold, with a significant number of analysts suggesting that the stock is fairly valued at current levels. The average target price set by analysts is $130.00, slightly below the current market price.
| Metric | Value |
|---|---|
| P/E Ratio | 28.0 |
| P/B Ratio | 3.5 |
| EV/EBITDA | 12.5 |
| Current Stock Price | $136.76 |
| 12-Month Stock Price Change | 60.5% |
| Dividend Yield | 2.3% |
| Payout Ratio | 20% |
| Analyst Consensus | Hold |
| Average Analyst Target Price | $130.00 |
Key Risks Facing ITT Inc. (ITT)
Key Risks Facing ITT Inc.
ITT Inc. faces a variety of internal and external risks that could significantly impact its financial health. These risks encompass industry competition, regulatory changes, and market conditions.
Industry Competition
The competitive landscape for ITT is characterized by intense rivalry among established firms and new entrants. For the three months ended September 28, 2024, ITT reported total revenue of $885.2 million, an increase of 7.7% compared to the previous year. However, the Motion Technologies segment experienced a decline of 4.1% in revenue, indicating challenges in maintaining market share.
Regulatory Changes
Changes in regulations can create significant compliance costs. The company is subject to various tax laws and regulations which can fluctuate. As of September 28, 2024, ITT's effective tax rate was 18.9%, down from 21.1% in the previous year. The anticipated implementation of global minimum corporate tax rates may also impact future tax liabilities.
Market Conditions
Market volatility can affect demand for ITT’s products. The company has reported unfavorable foreign currency impacts amounting to $1.7 million for the three months ended September 28, 2024. These fluctuations can hinder revenue growth, especially in international markets.
Operational Risks
Operational risks include disruptions in manufacturing and supply chain vulnerabilities. The company noted potential risks related to government contracting, including changes in government spending. Additionally, the impacts of the Russia-Ukraine war have been highlighted, affecting certain operational costs.
Financial Risks
Financial risks are amplified by higher interest expenses. For the three months ended September 28, 2024, total interest and non-operating expenses surged to $8.2 million, a 485.7% increase from the previous year. This increase is primarily attributed to higher long-term debt related to acquisitions.
Mitigation Strategies
To mitigate these risks, ITT Inc. has implemented various strategies. The company focuses on operational efficiency and cost management, resulting in a 22.4% operating margin for the nine months ended September 28, 2024. Furthermore, ITT is actively managing its capital structure and liquidity to ensure it can navigate financial uncertainties.
| Risk Factor | Description | Impact (if applicable) |
|---|---|---|
| Industry Competition | Intense rivalry affecting market share | Revenue decline of 4.1% in Motion Technologies |
| Regulatory Changes | Compliance with fluctuating tax laws | Effective tax rate decreased to 18.9% |
| Market Conditions | Volatility affecting demand | Unfavorable foreign currency impacts of $1.7 million |
| Operational Risks | Disruptions in manufacturing and supply chain | Increased costs from geopolitical tensions |
| Financial Risks | Higher interest expenses from debt | Total interest and non-operating expenses at $8.2 million |
Future Growth Prospects for ITT Inc. (ITT)
Future Growth Prospects for ITT Inc.
Analysis of Key Growth Drivers
The company has identified several key growth drivers that are expected to enhance its market position. These include:
- Product Innovations: Investment in research and development has led to a 12.4% increase in gross profit, reaching $314 million for Q3 2024 compared to $279.4 million in Q3 2023.
- Market Expansions: The acquisition of Svanehøj in January 2024 contributed $40 million in revenue for Q3 2024, reflecting the company’s strategy to expand its market reach.
- Acquisitions: The acquisition of kSARIA in September 2024 added an additional $15.3 million in revenue.
Future Revenue Growth Projections and Earnings Estimates
Revenue for the third quarter of 2024 was reported at $885.2 million, a 7.7% increase from $822.1 million in the same quarter of the previous year. For the nine months ended September 28, 2024, total revenue reached $2.7 billion, marking a 10.1% increase over $2.45 billion in the prior year.
Projected organic revenue growth is estimated at approximately 7.2% for FY 2024, driven by ongoing product innovations and market expansion efforts.
Strategic Initiatives or Partnerships That May Drive Future Growth
The company’s strategic initiatives include:
- Partnerships: Collaborations with key industry players to enhance product offerings and market presence.
- Investment in Technology: Continued investment in advanced technologies to improve operational efficiencies and product capabilities.
Competitive Advantages That Position the Company for Growth
ITT Inc. benefits from several competitive advantages:
- Diverse Portfolio: The company operates across various segments, including Motion Technologies, Industrial Process, and Connect & Control Technologies, which mitigates risk and enhances resilience.
- Strong Market Demand: There is a robust demand in the aerospace, defense, and energy sectors, which contributes positively to revenue growth.
Financial Performance Overview
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Revenue | $885.2 million | $822.1 million | 7.7% |
| Gross Profit | $314.0 million | $279.4 million | 12.4% |
| Operating Income | $207.9 million | $143.1 million | 45.3% |
| Net Income Attributable to ITT Inc. | $161.1 million | $110.8 million | 45.4% |
| Adjusted EPS | $1.46 | $1.37 | 6.6% |
The operating margin improved to 23.5% in Q3 2024, up from 17.4% in Q3 2023, showcasing enhanced operational efficiency.
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Article updated on 8 Nov 2024
Resources:
- ITT Inc. (ITT) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of ITT Inc. (ITT)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View ITT Inc. (ITT)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.