ITT Inc. Executing Well, But End-Market Weakness Could Create Opportunities For Investors

Industrials don’t move in lockstep through their cycles, and multi-industrial ITT Inc. (ITT) continues to benefit from both a stronger skew to process industries and company-specific share-gain drivers, not to mention better than expected margin leverage. With that, the stock has been a notable outperformer over the past year, beating its peer group by over 20%, with a strong run since reporting third quarter earnings.

Although I’m concerned that ITT could still see slowdown in the business (orders have been negative for two quarters), I think the nature of the company’s business mix will lead to a shallower, shorter slowdown than what many industrials are seeing. On top of that, the company appears to have more options to drive better operating margins over the next couple of years. I can’t say that ITT is all that cheap now (though a high single-digit expected return isn’t terrible), but if the company were to stumble a bit over the next few quarters on weakness in short-cycle markets, chemicals, or so on, it would definitely be an opportunity to reconsider these shares.

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ITT Inc. Executing Well, But End-Market Weakness Could Create Opportunities For Investors