- 13% orders growth (7% organic) driven by improved connectors demand, aerospace and defense components ramp, and Friction and rail share gains
- 14% revenue growth (9% organic), surpassing $900 million in revenue for the quarter, driven by higher volume in all businesses
- 80 basis points operating margin expansion to 16.4%; 120 basis points adjusted operating margin expansion to 17.0%
- 12% EPS growth (21% adjusted) driven by higher sales volume and productivity
- Raising 2024 full year guidance
STAMFORD, Conn., May 2, 2024 – ITT Inc. (NYSE: ITT) today reported financial results for the first quarter ended March 30, 2024. Revenue increased 14% (9% organic), primarily driven by pump projects in Industrial Process (IP), Friction original equipment (OE) outperformance in Motion Technologies (MT) and demand strength across Connect & Control Technologies (CCT). The acquisitions of Svanehøj and Micro-Mode contributed 5% to total revenue growth. Foreign currency translation was a 1% headwind.
First quarter operating income of $149 million increased 20% versus prior year (23% adjusted) due to higher sales volume and productivity gains, partially offset by higher labor and overhead costs and higher strategic investments, including for capacity expansion.
EPS for the first quarter of $1.34 increased 12% versus prior year, and 20% on a sequential basis. Adjusted EPS of $1.42 increased 21% compared to prior year and 6% on a sequential basis. The difference between reported and adjusted EPS is primarily due to acquisition related costs and restructuring charges.
Net cash from operating activities for the first quarter of $58 million was driven by higher operating income, offset by the timing of accounts receivable collections and higher incentive compensation payments. Free cash flow for the quarter of $30 million increased $1 million versus prior year.
Table 1. First Quarter Performance
Q1 2024 | Q1 2023 | Change | |
Revenue | $910.6 | $797.9 | 14.1% |
Organic Growth | 9.5% | ||
Operating Income | $149.2 | $124.3 | 20.0% |
Operating Margin | 16.4% | 15.6% | 80 bps |
Adjusted Operating Income | $155.0 | $126.2 | 22.8% |
Adjusted Operating Margin | 17.0% | 15.8% | 120 bps |
Earnings Per Share | $1.34 | $1.20 | 11.7% |
Adjusted Earnings Per Share | $1.42 | $1.17 | 21.4% |
Net Cash from Operating Activities | $57.8 | $58.1 | (0.5)% |
Free Cash Flow | $30.1 | $29.4 | 2.4% |
Management Commentary
"The momentum we built in 2023 continued in Q1 with a strong operational and financial performance. We generated just shy of one billion dollars of new orders, highlighted by record aerospace orders, strong connectors demand and share gains in Friction and rail. Revenue surpassed $900 million in the quarter, growing 14% in total driven by strong volume growth across all segments and the acquisition of Svanehøj. A continued focus on safety, quality, delivery and cost drove operating margin to more than 16%, with Motion Technologies reaching 18%. We kept on investing to expand pump capabilities in growth areas and to add capacity to support new Friction awards. With these organic investments, the acquisition of Svanehøj and our balance sheet capacity, we will strengthen ITT's differentiation and expect to grow profitably. Thanks to our performance in Q1, including our orders momentum and our demand outlook, we are raising our organic revenue, operating margin and EPS guidance for 2024," said ITT's Chief Executive Officer and President Luca Savi.
Table 2. First Quarter Segment Results
Revenue | Operating Income | Operating Margin | |||||||
Q1 2024 | Reported Change |
Organic Growth |
Q1 2024 | Reported Change |
Adjusted Change |
Q1 2024 | Reported Change |
Adjusted Change |
|
Motion Technologies | $392.4 | 7.6% | 8.2% | $70.6 | 32.2% | 32.0% | 18.0% | 340 bps | 340 bps |
Industrial Process | $333.9 | 25.3% | 12.5% | $63.8 | 15.4% | 19.9% | 19.1% | (170) bps | (90) bps |
Connect & Control Technologies | $185.1 | 10.4% | 7.2% | $32.1 | 11.2% | 14.7% | 17.7% | 20 bps | 70 bps |
Motion Technologies revenue increased $28 million primarily due to higher sales volume in Friction OE and rail demand in KONI, partially offset by unfavorable foreign currency translation. Operating income increased $17 million primarily due to higher sales volume, productivity savings, and lower material and overhead costs.
Industrial Process revenue increased $67 million primarily due to growth in pump projects and the acquisition of Svanehøj, which closed in January 2024. This was partially offset by foreign currency translation. Operating income increased $9 million primarily due to higher volume and productivity savings.
Connect & Control Technologies revenue increased $18 million primarily driven by pricing actions and higher volumes in connectors and components for aerospace and defense and the Micro-Mode acquisition. Operating income increased $3 million primarily due to pricing, volume and productivity actions, partially offset by higher material, labor and overhead costs.
Quarterly Dividend
The company announced today a quarterly dividend of $0.319 per share on the company's outstanding common stock. ITT's Board of Directors approved the cash dividend for the second quarter of 2024, which will be payable on July 1, 2024, to shareholders of record as of the close of business on June 3, 2024.
2024 Guidance
We now expect revenue growth of 9% to 12%, up 4% to 7% on an organic basis; operating margin of 16.9% to 17.5% and adjusted operating margin of 17.1% to 17.7%, up 20 to 80 bps (up 100 to 160 bps excluding the Svanehøj acquisition dilution); full year EPS of $5.51 to $5.76 and adjusted EPS of $5.65 to $5.90, up 8% to 13% for the full year. We continue to expect free cash flow of $435 million to $475 million, representing 12% to 13% free cash flow margin for the full year.
It is not possible, without unreasonable efforts, to estimate the impacts of foreign currency fluctuations, acquisitions and certain other special items that may occur in 2024 as these items are inherently uncertain and difficult to predict. As a result, we are unable to quantify certain amounts that would be included in a reconciliation of organic revenue growth and adjusted segment operating margin to the most directly comparable GAAP financial measures without unreasonable efforts and accordingly we have not provided reconciliations for these forward-looking non-GAAP financial measures.
Investor Conference Call Details
ITT's management will host a conference call for investors on Thursday, May 2 at 8:30 a.m. Eastern Time. The briefing can be accessed live via a webcast, which is available on the company's website: https://investors.itt.com. A replay of the webcast will be available beginning two hours after the webcast. Reconciliations of non-GAAP financial performance metrics to their most comparable U.S. GAAP financial performance metrics are defined and presented below and should not be considered a substitute for, nor superior to, the financial data prepared in accordance with U.S. GAAP.