Release Date: October 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- ITT Inc (ITT, Financial) achieved a 14% organic growth in orders, with a record backlog of $1.7 billion.
- The company reported a 7% adjusted EPS growth, and 9% growth excluding the impact of the Walgreen divestiture.
- ITT Inc (ITT) experienced strong performance in its legacy business, with operating margins exceeding long-term targets.
- The company successfully integrated recent acquisitions, such as Svanehoj and kSARIA, contributing to its growth.
- ITT Inc (ITT) raised its full-year adjusted EPS guidance, reflecting confidence in continued profitable growth.
Negative Points
- The company faced challenges with foreign currency impacts, which affected margins by 80 basis points.
- ITT Inc (ITT) experienced a slowdown in order activity from Boeing due to production stoppages.
- Free cash flow was below expectations due to issues with working capital, specifically accounts receivable and inventory.
- The aerospace and defense segment faced potential disruptions due to ongoing negotiations with Boeing.
- The company is dealing with temporary acquisition amortization, impacting short-term financial results.
Q & A Highlights
Q: How reflective do you think your results are of the underlying market conditions, especially in industries like process where there are mixed signals?
A: Luca Savi, President and CEO, explained that ITT's results reflect the company's differentiation, particularly in performance. He highlighted the 100% on-time delivery and quality in Saudi operations as key factors in winning market share. Emmanuel Caprais, CFO, added that ITT's orders grew across all end markets, indicating strong performance with every customer.
Q: With recent M&A activity, how interested are you in pursuing more acquisitions, and what about the free cash flow guidance?
A: Luca Savi stated that ITT is actively cultivating its M&A pipeline, emphasizing that recent acquisitions like Svanehoj and kSARIA are performing well. Emmanuel Caprais noted that free cash flow was impacted by working capital, particularly AR and inventory, but expects improvements as inventory levels are managed.
Q: Can you elaborate on the 136% growth in pump projects and whether purchasing patterns have changed?
A: Luca Savi mentioned that while project growth can fluctuate, ITT's strong performance and collaboration with EPCs have led to market share gains. He noted that EPCs are working more in partnership with ITT due to its reliable delivery and quality.
Q: How are you managing production around Boeing's current disruptions, and does this affect contract negotiations?
A: Luca Savi explained that ITT is closely working with Boeing to support production restarts, which may impact Q4 revenues by approximately $10 million. Contract negotiations are ongoing as some contracts expire at the end of the year and Q1 2025.
Q: Can you discuss your pricing strategy and expectations for 2025?
A: Luca Savi highlighted that pricing strategies vary by business segment. In 2024, ITT achieved positive price-cost dynamics, particularly in CCT and MT. Looking forward, ITT plans to be more strategic and analytical in pricing, focusing on value delivery and regional specifics.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
