Raises 2017 total revenue and EPS guidance
- Revenue up 1% to $631 million
- Segment operating income up 12%
- EPS increased to $0.54
WHITE PLAINS, N.Y., August 4, 2017
- Organic revenue down 2%; Organic orders up 1%
- Adjusted segment operating income down 4%, including unfavorable FX of $6 million
- Adjusted EPS down 3% to $0.65
– ITT Inc. (NYSE: ITT) today reported solid 2017 second-quarter financial results that primarily reflect the company’s ability to leverage the benefits from proactive restructuring and operational improvements while advancing share gains and market growth strategies in key global end markets.
On a GAAP basis, the company delivered revenue of $631 million, a 1 percent increase, reflecting benefits from the Axtone Rail Components acquisition. Organic revenue (defined as total revenue excluding foreign exchange, acquisition and divestiture impacts) decreased 2 percent as growth in transportation, driven by automotive, was more than offset by lower industrial and global oil and gas pump project activity. Organic orders grew 1 percent primarily due to strong automotive share gains in Europe and China, strength in short-cycle pumps and connector gains across key end markets, partially offset by weakness in upstream oil and gas pump projects.
GAAP segment operating income increased 12 percent and adjusted segment operating income decreased 4 percent, reflecting restructuring and productivity benefits, which were offset by $6 million of unfavorable foreign exchange, $4 million of strategic investments to support continued long-term automotive platform wins and estimated impacts from restrictions on sales of certain military-specification connectors. Excluding foreign exchange, adjusted segment operating income increased 3 percent. GAAP segment operating income also included the impact of a legal accrual that was more than offset by benefits from lower restructuring and acquisition-related costs.
GAAP EPS increased $0.18 to $0.54 and adjusted EPS, which excludes special items, decreased $0.02 to $0.65, as a lower tax rate, interest expense and share count were more than offset by higher environmental costs, as well as unfavorable foreign exchange. Excluding foreign exchange, adjusted EPS grew 6 percent.
For a reconciliation of GAAP to non-GAAP results, please refer to www.itt.com/investors
or click here
“In the second quarter, ITT drove activities across the enterprise to optimize execution while advancing essential long-term growth strategies,” said CEO and President Denise Ramos. “From an execution standpoint, we continued to successfully leverage the benefits of our structural reset at Industrial Process (IP) and we drove solid operational improvements at our Connect and Control Technologies (CCT) facilities. These efforts contributed to over 200 basis points of sequential adjusted margin improvement compared to the first quarter at both businesses. And despite increased commodity costs, we continued to deliver solid productivity gains in our Motion Technologies (MT) business.
“In addition, we continued to penetrate new and existing markets as we grew our presence on key incremental automotive brake pad platforms in China and North America, captured new shock absorber business in the China high-speed rail market, and advanced our global electric vehicle market capture strategies in both braking components and connectors.
"We also have recently produced our first prototype automotive brake pads in our new world-class North American facility, we are nicely on track with the integration of our Axtone Railway Components acquisition, and we continue to invest to support recent share gains in key growth markets such as rotorcraft. In addition, we are continuing our track record of strategically deploying our capital, including $30 million of share repurchases, to create value for shareowners.”
2017 Second-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.
Motion Technologies designs and manufactures braking technologies, shock absorbers and specialized sealing solutions for the automotive and rail markets.
- Total revenue and organic revenue decreased 10 percent to $192 million, reflecting project declines, primarily due to lower oil and gas projects in North America, Asia and Latin America, as well as short-cycle declines in baseline oil and gas pumps and chemical valves.
- GAAP operating income increased 135 percent to $15 million, and adjusted segment operating income decreased 38 percent to $15 million. Both measures primarily reflect lower volumes, negative impacts from pump projects with a high degree of engineering and manufacturing complexity and higher incentive compensation costs, which were partially offset by incremental restructuring benefits. The GAAP operating income increase reflects a prior-year trade name impairment and lower restructuring costs in the current year.
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 12 percent to $290 million, and organic revenue increased 5 percent, reflecting share gains and market growth in automotive brake pads in Europe and China and strength in sealing solutions at Wolverine. Total revenue includes $5 million of unfavorable foreign exchange and incremental revenue of $22 million from the acquisition of Axtone.
- GAAP operating income increased 7 percent to $52 million, and adjusted segment operating income increased 6 percent to $53 million. Both increases reflect strong volume growth, increased productivity and benefits from the acquisition of Axtone, partially offset by commodity costs, pricing pressures, strategic investments and $5 million of unfavorable foreign exchange. Excluding foreign exchange, adjusted segment operating income increased 15 percent.
- Total revenue decreased 3 percent to $150 million, and organic revenue decreased 2 percent. The revenue decreases reflect lower wide-body platform demand in commercial aerospace and impacts from restrictions on sales of certain military-specification connectors, partially offset by an increase in oil and gas global connector activity as well as growth in electric vehicle charging and heavy vehicle connectors.
- GAAP operating income decreased 19 percent to $14 million and adjusted segment operating income increased 14 percent to $21 million. GAAP operating income included a legal accrual, and higher restructuring costs. Both measures reflect improved productivity from operational efficiency, material savings and labor cost controls, as well as incremental restructuring benefits, partially offset by estimated impacts from military-specification connectors and $1 million of unfavorable foreign exchange. Excluding foreign exchange, adjusted segment operating income increased 20 percent.
The company is raising its previously announced 2017 full-year revenue guidance to the range of flat to up 2 percent primarily due to the positive impacts of foreign exchange. In addition, the company is raising the midpoint of its previously announced adjusted EPS guidance by $0.07 to $2.45. The new adjusted EPS range is now $2.40 to $2.50. The updated adjusted EPS guidance reflects solid operational execution, partially offset by incremental commodity headwinds, and benefits from non-operating items, net of incremental investments. The new adjusted EPS midpoint of $2.45 represents a 6 percent increase compared to the prior year, or an 8 percent increase excluding foreign exchange.
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 website: www.itt.com/investors
and will be available on the website from two hours after the webcast until Friday, Aug. 18, 2017, at midnight.
All references to EPS are defined as diluted earnings per share from continuing operations.