ITT ITT Inc

ITT Corporation (ITT) released its first quarter 2011 earnings results and reported earnings per share from continuing operations of 98 cents, outperforming the Zacks Consensus Estimate of 93 cents. Earnings in the quarter increased by 18% year over year.

Total Revenue

Total revenue in the quarter was $2.76 billion compared with $2.57 billion in the prior-year period. This was ahead of the Zacks Consensus Estimate of $2.64 billion.

Segment Results

First-quarter 2011 Defense and Information Solution revenue was $1.3 billion, down 4% year over year, due largely to the combined impact of changing U.S. Department of Defense purchase strategies and decreased revenue from jammers and radios. Orders were 26% healthier than in the year-ago period, driven by increased service activity and new key program wins.

Total Fluid revenues of $992 million improved 24% reflecting the impact of acquisitions as well as strong organic growth in the Water and Wastewater and Residential and Commercial Water businesses. Organic revenues grew 8% in the quarter. Industrial process led the way within the Oil & Gas projects and mining markets.

Motion and Flow Control's revenue grew 11% in the first quarter to $430 million. Organic orders were up 20% driven by significant growth in the aerospace market at Control Technologies, as well as robust performances in the automotive and rail markets.

Income and Expenses

Operating income in the quarter was $188 million compared with $245 million. SG&A expense amounted to $430 million and R&D expense was $61 million.

Balance Sheet & Cash Flow

At the end of the quarter, cash and cash equivalents were $1,074 million with long-term debt of $1,354 million and shareowners' equity of $4,768 million.

Outlook

ITT has narrowed its 2011 full-year adjusted earnings per share guidance range to $4.70 to $4.82, up from the previously announced range of $4.62 to $4.82. The company has, however, revised its total revenue outlook downward for 2011 from $11.4 billion to $11.3 billion due to uncertainty in the U.S. defense market.

ITT plays an important role in vital markets, including water and fluids management, global defense and security, and motion and flow control. It possesses industry leading brands in the Fluid Technology and Motion & Flow Control businesses. The company is well diversified and serves attractive end markets with a broad geographic footprint.

We are particularly bullish about these two segments: a) water equipment (primarily pumps), which should benefit from the replacement and upgrade of ageing networks in developed markets and the build out of infrastructure in emerging markets, and b) ITT’s Defense business, with the bulk of sales derived from electronic and network-centric warfare.

The Defense Electronics & Services business segment is subject to a number of risks, including defense budgets and government contract requirements and regulations, which could have an adverse impact on the results of its operations.

The Fluid Technology and Motion & Flow Control business segments are subject to certain industry risks, which could have an adverse impact on the results of its operations.

Adverse macroeconomic and business conditions, particularly in the local economies of the countries or regions where the company operates, may negatively affect its revenues, profitability and operations.

The company’s Defense Electronics and Services segment develops, manufactures, and supports high-technology electronic systems and components for worldwide defense and commercial markets, and provides communications systems and engineering and applied research. Principal manufacturing facilities are located in the United Kingdom and United States of America.

ITT Corporation, with 2010 revenues of $10.99 billion, is a global multi-industry leader in high-technology engineering and manufacturing. It is engaged in the design, manufacture, and sale of a wide-range of engineered products and the provision of services. Lockheed Martin Corporation (LMT) is a major competitor.

We currently have a Neutral recommendation on ITT Corporation.

 
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