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It has been about a month since the last earnings report for ITT (ITT). Shares have added about 8.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is ITT due for a pullback? 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 Q2 Earnings & Revenues Beat Estimates, Decrease Y/Y
ITT reported better-than-expected results in second-quarter 2020, wherein both earnings and revenues surpassed the Zacks Consensus Estimate.
In the reported quarter, the company pulled off an earnings surprise of 58.3%. Quarterly adjusted earnings were 57 cents per share, outpacing the Zacks Consensus Estimate of 36 cents. However, the bottom line declined 38.7% from the year-ago figure.
Revenues of $514.7 million were down 29% year over year. However, the top line surpassed the consensus mark of $507 million by 1.5%. Also, revenues fell 27.6% on an organic basis.
Segmental Breakup
Second-quarter revenues of Industrial Process were $193.3 million, down 16.9% year over year. Organic sales declined 16.6%, owing to lower revenues from pump projects and weakness across the short-cycle business.
Quarterly revenues of Motion Technologies declined 37.3% year over year to $199.3 million. Organic sales decreased 34.7% in the quarter mainly due to lower Friction sales on account of soft demand, owing to the coronavirus outbreak.
Connect & Control Technologies generated $122.9 million revenues, down 27.8% year over year. Organic sales dipped 29.3%, owing to weakness across aerospace and defense end markets amid the coronavirus outbreak.
Costs/Margins
Cost of sales in the second quarter was $351.1 million, down 28.1% year over year. Sales and marketing expenses were $35.7 million compared with $42.7 million in the year-ago quarter.
Gross profit margin was 31.8%, down 40 basis points.
In the quarter, income tax benefits were $28.1 million compared with income tax expenses of $19.3 million in the year-ago quarter.
Balance Sheet/Cash Flow
Exiting the second quarter, ITT had cash and cash equivalents of $819.1 million, up from $612.1 million as of Dec 31, 2019. Short-term debt and current maturities of long-term debt were $247.5 million compared with $86.5 million at the end of 2019. Free cash flow in the quarter increased to $168.8 million from $55.3 million in the year-ago quarter.
In the first six months of 2020, the company generated $203.1 million in cash from operating activities, higher than $101.1 million recorded in the year-ago comparable period. Capital expenditure totaled $34.3 million, declining from $45.8 million spent in the year-ago comparable period.