Summary:
ITT Corporation reported solid third-quarter 2014 results with earnings that significantly surpassed the Zacks Consensus Estimate and year-ago figure. The primary driver was a notable improvement in productivity, driven by diligent operational execution and cost-cutting initiatives. Strength in the company's Motion Technologies segment was another positive. Furthermore, ITT Corporation increased its earnings guidance for the year 2014. However, strong competition in the market remains a concern. Also, weak demand in the defense and connectors markets can impact the company's financials, going forward. Hence, we have maintained our Neutral recommendation.
Overview:
Headquartered in the New York City, ITT Corporation is a global multi-industry leader in high-technology engineering and manufacturing projects. It is engaged in the design, manufacture and sale of a wide range of engineered products and services. The company employs approximately 9,400 people worldwide.
For financial reporting purposes, the company organizes its business into four principal segments as follows:
Industrial Process Segment (accounts for approximately 44% of total revenues in 2013): Deals in manufacturing engineered fluid process equipments catering to the requirements of diverse industries like oil & gas, mining, power generation and chemical, among others. Through this segment, the company also provides plant optimization and efficiency solutions, and aftermarket services and parts.
Motion Technologies Segment (29%): Specializes in manufacturing highly engineered and durable components, consisting of brake pads, shock absorbers and damping technologies for the transportation industry. Motion Technologies consists of two businesses (i) Friction Technologies and (ii) KONI. Through its Friction Technologies business, the segment provides the automotive market with high-performance, high-quality brake pads. Through its KONI business, the segment provides the transportation industry with shock absorber and damping equipment.
Interconnect Solutions Segment (16%): Deals in designs and manufactures a broad range of highly engineered connectors and cable assemblies for critical applications in harsh environments that make it possible to transfer signal and power in an increasingly connected world. The segment primarily caters to customers in the aerospace, oil and gas, medical, handheld electronics, industrial, alternative energy, transportation and defense markets.
Control technologies Segment (11%): Specializes in the production of equipments like actuation, valves, switches, custom-energy absorption, vibration isolation and regulators as well for the markets like aerospace, defense and industrial applications.
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