ITT (ITT) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a 9% revenue growth compared to Q2 2023, driven by higher volumes across all segments and the acquisition of Svanehoj, which contributed 4 percentage points to growth [5][20] - Adjusted EPS grew by 12% to a record $1.49, with significant acceleration in free cash flow [4][20] - The company achieved a 100 basis point margin expansion to 18%, with Motion Technologies and CCT reaching margins close to 19% [6][19] Business Line Data and Key Metrics Changes - CCT experienced double-digit organic growth, driven by industrial connectors and aerospace and defense components, with connectors growing 14% [5][18] - Motion Technologies grew 6% organically, with Friction outperforming by over 600 basis points [6][18] - IP orders were up slightly due to Svanehoj, with legacy pump project orders increasing by 9% sequentially [11][18] Market Data and Key Metrics Changes - The company noted strong performances in aerospace and defense, Friction, and industrial connectors, with significant growth in China [4][6] - The automotive segment is expected to represent only 30% of the total ITT portfolio following recent divestitures [8] Company Strategy and Development Direction - The company is focused on reshaping its portfolio towards higher growth and higher-margin businesses, as evidenced by the acquisition of kSARIA and the divestiture of non-core automotive operations [7][8][15] - The acquisition of kSARIA is expected to enhance ITT's position in the defense and aerospace markets, with a strong growth outlook supported by leading positions on sought-after A&D programs [16][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving full-year guidance despite the impact of the Wolverine divestiture, citing strong performance in Q2 [9][20] - The company anticipates continued organic revenue growth in the mid-single-digit range across all segments for the third quarter [24] Other Important Information - The company announced the acquisition of kSARIA for approximately$ 475 million, which is expected to close by the end of September [7][16] - The company repurchased $79 million of its shares and paid down nearly$ 40 million of debt in Q2 [17] Q&A Session Summary Question: Can you elaborate on the kSARIA deal and its fit with the existing A&D interconnection business? - Management highlighted the strategic fit of kSARIA with ITT's existing capabilities and the strong relationship built over time, indicating that kSARIA's operations are well-run and aligned with ITT's standards [29][30] Question: What are the growth expectations for kSARIA? - The company expects kSARIA to achieve high single-digit growth over the next three to four years, reflecting a more realistic outlook compared to its historical growth rates [53] Question: What is the revenue base for Wolverine? - Wolverine's revenue is approximately $160 million on a yearly basis [52] Question: How is the aerospace supply chain performing? - Management noted improvements in supplier management and on-time delivery, although end customer demand remains volatile [81]