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Is a Surprise in the Cards for ITT this Earnings Season?

ITT Inc. ITT is slated to report second-quarter 2017 results on Aug 4.

In the last reported quarter, the company topped estimates by 6.7%. Overall, ITT has a decent earnings surprise history. The company has an average positive surprise of 8.2%, with three beats and one in-line earnings.

Let’s see how things are shaping up for this announcement.

Factors to Consider

ITT’s diversified operations across key end markets, geographies and business cycles are one of the company’s biggest strengths that help in combating weakness in a single market. Also, the company’s diligent restructuring efforts to streamline its business structure has helped achieve margin expansion in recent times. We believe ITT’s Lean Six Sigma and global sourcing efforts will likely generate significant savings, thus stoking growth during the second quarter.

As a matter of fact, ITT expects intensified operational focus and restructuring benefits to help it generate gross productivity savings of over $100 million for 2017. In addition, the company’s focus on market expansion strategies are expected to stoke growth. Over the past couple of quarters, ITT’s investments have expanded its global reach and capabilities as well as driven organic growth.

In the last reported quarter, the company’s geographic expansion helped it brave difficult market conditions. In this regard, the Wolverine and Hartzell acquisitions, which have strengthened ITT’s transportation segment, might act as key growth catalysts. Also, Motion Control Technologies segment’s top line is expected to benefit from the Axtone buyout. The acqusition has boosted ITT’s stronghold over railway, aerospace and automotive domains.

On the flip side, continuous strengthening of the U.S. dollar is likely to affect the company’s top-line rise for the soon-to-be-reported-quarter. In addition, lower global commodity prices and softness in weak short cycle pump activity, due to cautious customer spending and prolonged replacement cycles, are expected to weigh on the company’s second-quarter financials.

Moreover, a decline in short cycle upstream oil and gas connector business is likely to aggravate slowdown in upstream business. Particularly, midstream and downstream markets might bear the brunt of the oil price vagaries. Also, pricing pressure on large projects and lower petrochemical and mining project activity are anticipated to hurt petrochemical business for the soon-to-be-reported quarter.

Earnings Whispers

Our proven model does not conclusively show that ITT will beat estimates in this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.

Zacks ESP: Earnings ESP for the company is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 63 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

ITT Inc. Price and EPS Surprise

 

ITT Inc. Price and EPS Surprise | ITT Inc. Quote

Zacks Rank: ITT currently carries a Zacks Rank #3. Though a Zacks Rank #1, 2 or 3 increases the predictive power of the ESP, the company’s ESP of 0.00% makes surprise prediction difficult.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter.

JELD-WEN Holding, Inc. JELD has an Earnings ESP of +7.69% and a Zacks Rank #2.

CACI International Inc CACI has an Earnings ESP of +1.83% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Arrow Electronics, Inc. ARW has an Earnings ESP of +1.13% and a Zacks Rank #2.

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