Industrial demand is recovering sharply, but ITT Inc. (ITT) is having a hard time meeting it given ongoing supply chain issues. That ITT posted the margins it did in the fourth quarter should be a testament to management, but cost headwinds are going to remain fierce through at least the first half of the year, dampening the near-term operating leverage at this industrial name.
I was lukewarm on ITT back in August, seeing okay long-term potential in the name, but more near-term challenges, particularly in light of valuation. Since then the shares have declined about 5%, doing a bit worse than the broader industrial space, but holding up pretty well compared to names like Eaton (ETN) and IDEX (IEX). Given what I think is realistic (if not conservative) guidance at a time when other industrial management teams seem to be taking more chances with guidance, and given a more attractive valuation, I think this is a name that is once again worth a closer look.
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ITT Managing Fierce Headwinds Well, And Underlying Demand Is Strong
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