ITT Corp.'s Q2 Profit Falls 26% On Company Breakup Costs
July 29 2011 - 7:29AM
Dow Jones News
ITT Corp. (ITT) second-quarter profit dropped 26% from a year
earlier, as expenses related to the breakup of the defense and
industrial conglomerate weighed on results.
The company, which raised its 2011 revenue outlook, but left its
income guidance unchanged, plans to separate into three public
companies that will spin off to ITT shareholders by the end of the
year.
In its current configuration, the White Plains, N.Y., company
reported second-quarter profit of $168 million, or 90 cents per
share, down from $226 million, or $1.22 per share a year earlier.
Excluding breakup costs, ITT's income from ongoing operations was
$220 million, or $1.18 per share, as higher income from the
company's fluid technology unit and motion and flow control unit
offset lower profit from the defense business. Revenue from the
quarter rose 10.4% from a year earlier to $3.02 billion.
Analysts expected the company to earn $1.16 a share before
special expenses on $2.84 billion of revenue.
The company said it accumulated $46 million in second-quarter
expenses related to the breakup, up from $30 million spent in the
first quarter. The company reiterated its April forecast that
one-time cash charges for the breakup will reach about $500 million
by the time the spinoff is completed.
ITT announced early this year that it would split the company to
separate ITT's defense unit from its water and industrial
businesses. Defense had been the company's best-performing business
during the economic recession, but U.S. military spending is being
significantly curtailed to help reduce U.S. budget deficits.
ITT intends to call the new defense company ITT Exelis. During
the second-quarter, operating income from the defense business
dropped 27% from a year earlier to $142 million, mostly because of
increased sales of lower margin products and services. Defense's
operating margin slipped to 9.4% from 12.95%. Revenue from the unit
was flat at $1.50 billion.
In the fluid technology unit, which largely will become a water
treatment equipment and services company called Xylem,
second-quarter operating income swelled by 24% to $161 million.
Revenue increased 26% to $1.1 billion.
ITT's motion and flow control unit, which includes most of the
company's industrial components and equipment businesses, reported
a 36% increase in operating income to $57 million. Revenue climbed
14% to $414 million. The unit's operating margin expanded to 13.8%
from 11.6%.
ITT raised its revenue outlook for the year to $11.5 billion
from $11.3 billion forecast in April. The increase was attributed
to recent defense contracts and higher revenue from fluid
technology. But the company maintained its spring earnings guidance
for 2011 at $4.70 to $4.82 per share, suggesting that ITT expects
to have difficulty expanding income even with higher sales.
Analysts polled by Thomson Reuters expect the company to earn
$4.79 per share in 2011 on revenue of $11.38 billion.
ITT's stock ended Thursday's U.S. trading session down 0.80%, or
44 cents, at $54.50 a share.
-By Bob Tita, Dow Jones Newswires; 312-750-4129;
robert.tita@dowjones.com
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