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It has been about a month since the last earnings report for ITT (ITT). Shares have lost about 6.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is ITT due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
ITT's Q2 Earnings and Revenues Surpass Estimates, Up Y/Y
ITT pulled off a positive earnings surprise of 4.5% in the second quarter of 2019. Quarterly adjusted earnings came in at 93 cents per share, outpacing the Zacks Consensus Estimate of 89 cents. The bottom line also came in 13.4% higher than the year-ago figure.
Revenues totaled $719.9 million, up 3% year over year. The top line also surpassed the consensus estimate by 2.3%. Notably, revenues jumped 5% year over year on an organic basis.
Second-quarter revenues of the company’s Industrial Process segment were $232.6 million, up 14.5% year over year. Organic sales jumped 12.6%, driven by increase in pump projects and strong aftermarket demand in oil and gas, chemical parts and service markets.
Quarterly revenues of the company’s Motion Technologies segment declined 3.8% year over year to $317.7 million. Notably, forex woes had 5.3% adverse impact on sales. Organic sales increased 1.3% in the quarter, mainly on account of global rail share gains and Friction OEM growth, partially offset by softness in the Wolverine business.
Connect & Control Technologies segment generated $170.2 million revenues, up 3.7% year over year. Organic sales increased 4.8%, driven by rise in commercial aerospace connectors and components.
Costs/Margins
Cost of sales in the second quarter was $487.9 million, up 3.6% year over year. Gross profit margin was 32.2%, down 20 basis points (bps).
Sales and marketing expenses were $42.7 million compared with $43.4 million in the year-ago quarter. Operating margin increased 40 bps to 11.9%.
Income tax expenses were $19.3 million, up from $8.9 million.
Balance Sheet/Cash Flow
Exiting the second quarter, ITT had cash and cash equivalents of $531.9 million, down from $561.2 million recorded as of Dec 31, 2018.
In the first six months of 2019, the company generated $101.1 million cash from operating activities, lower than $119.3 million recorded in the year-ago period. Capital expenditure totaled $45.8 million, declining from $46.3 million spent in the first six months of 2018. Adjusted free cash flow was $82.1 million, down from $91 million.