• Orders Growth: 10% overall, 5% organic, ending backlog of $1.6 billion, up 34% year over year.
• Revenue Growth: 11% overall, 7% organic, with strong performance across all businesses.
• Margin Expansion: Increased by 80 basis points to nearly 18%.
• Free Cash Flow: Nearly $440 million generated.
• EPS Growth: 12% increase, following a 17% growth in 2023.
• Fourth Quarter Revenue Growth: 12% overall, 6% organic.
• Operating Margin: Reached 17.5% in Q4, with MT surpassing 19% and IP eclipsing 21%.
• Connect & Control Technologies Growth: 9% organic, driven by defense, industrial connectors, and aerospace.
• Industrial Process Growth: 8% organic, with high-teens growth in pump projects.
• Motion Technologies Growth: 5% organic, with KONE Rail growing 20%.
• Acquisitions: $865 million deployed for Svanehj and kSARIA acquisitions.
• Svanehj Orders Growth: 26% for the full year.
• Free Cash Flow Increase: 42% year over year in Q4.
• 2025 Revenue Outlook: Expected to exceed $3.7 billion, with 3% to 5% organic growth.
• 2025 Margin Expansion: Expected 90 basis points increase to 18.6% at the midpoint.
• 2025 EPS Growth: 8% at the midpoint, excluding temporary amortization impacts.
• 2025 Free Cash Flow Projection: Approximately $475 million at the midpoint.

• Warning! GuruFocus has detected 3 Warning Sign with CX.

Release Date: February 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• ITT Inc (NYSE:ITT) achieved a 10% increase in orders, with a 5% organic growth, resulting in a backlog of $1.6 billion, up 34% year over year.
• The company reported an 11% revenue growth, with 7% organic growth, driven by strong performance across all business segments.
• ITT Inc (NYSE:ITT) expanded its operating margin by 80 basis points to nearly 18%, surpassing long-term margin targets two years ahead of schedule.
• The company generated nearly $440 million in free cash flow and delivered a 12% EPS growth, despite challenges from divestitures and acquisitions.
• Strategic acquisitions of Svanehj and kSARIA contributed significantly to growth, with Svanehj orders growing 26% for the year.

Negative Points

• The divestiture of Wolverine resulted in a loss of approximately $15 million in income, impacting overall earnings.
• Higher interest expenses due to recent acquisitions posed a challenge, affecting the company's financial performance.
• The first quarter of 2025 is expected to be unusually soft, with flat to slightly up EPS compared to the previous year.
• The company faces potential risks from tariffs, which could impact operations and require strategic adjustments.
• The automotive market is projected to decline, with global vehicle production expected to decrease, posing challenges for the Motion Technologies segment.

Q & A Highlights

Q: Can you explain the guidance for 2025, particularly the earnings cadence and any potential impacts in Q1? A: Emmanuel Caprais, CFO, noted that the earnings cadence is tilted towards the second half of the year, with Q1 expected to be unusually soft. The Wolverine divestiture will impact Q1 revenue and income, resulting in a $0.06 EPS reduction. Organic revenue is expected to decline by 1% to 2%, mainly due to lower auto demand affecting Motion Technologies (MT). However, all businesses are expected to expand margins, and a recovery is anticipated in Q2, Q3, and Q4 with continued margin expansion and organic revenue growth.

Q: Could you elaborate on the price renegotiations in Connect & Control Technologies (CCT) and the potential opportunities within that segment? A: Luca Savi, CEO, stated that pricing has been a significant lever for CCT and will continue to be so in 2025. The company is in the process of renegotiating major contracts, and the signs are positive. The price/cost equation has been favorable for ITT in 2024 and is expected to remain so in 2025.

Q: What are the order patterns in the Industrial Process (IP) segment, and how do you expect them to evolve in 2025? A: Luca Savi highlighted that orders grew 12% organically in Q4, with projects up 25% and short cycle up 8%. The weekly run rate of orders in Q4 was the second highest on record. For the full year, organic orders were up 5%, with projects up 13% year-over-year. The order funnel remains strong, particularly in regions like the Middle East and Latin America, despite a slight year-over-year decline.

Q: Can you clarify the impact of temporary intangible amortization on earnings and the core incremental margins for IP and CCT? A: Emmanuel Caprais explained that in 2024, there was $0.17 of temporary intangible amortization, expected to be roughly the same in 2025. The benefit from amortization will start in Q2 for Svanehj and in Q4 for kSARIA. For IP, core incremental margins were 64% in Q4 and 45% for the full year, excluding acquisitions. CCT had around 20% incrementals for the full year, with strong expected incrementals in 2025.

Q: How does ITT's M&A strategy functionally enhance its operations, and what changes have been made? A: Luca Savi emphasized that ITT's M&A strategy involves significant cultivation and relationship-building with targets, as seen with recent acquisitions like Svanehj and kSARIA. The company has been able to secure exclusive deals through this approach. ITT is actively engaged in due diligence and has walked away from some opportunities, indicating a disciplined approach to M&A.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.