On November 2, 2023, ITT Inc. (ITT, Financial) released its financial results for the third quarter ended September 30, 2023. The company reported a year-over-year revenue increase of 9%, primarily driven by 13% growth in both Industrial Process and Connect & Control Technologies. Foreign currency translation had a 3% favorable impact, and the acquisition of Micro-Mode contributed 1% to total revenue growth.
Financial Highlights
ITT's third quarter segment operating income of $157 million increased 19% versus the prior year (17% adjusted) due to productivity, pricing actions, and higher sales volume. This was partially offset by higher compensation costs, overhead inflation, and strategic growth investments.
The company's EPS for the third quarter of $1.34 increased 9% versus the prior year primarily due to segment operating income growth and benefits from share repurchases. Adjusted EPS of $1.37 increased 14% compared to the prior year. Adjustments to EPS are primarily related to restructuring costs to optimize the company’s cost base and write-downs due to the suspension of business in Russia.
Operating cash flow for the third quarter of $170 million increased $109 million versus the prior year primarily driven by higher operating income and improved working capital management. Free cash flow for the quarter of $148 million increased $113 million versus the prior year. On a year-to-date basis, ITT generated operating cash flow of $368 million, up $252 million versus 2022, and free cash flow of $299 million, up $258 million versus 2022.
Management Commentary
“In Q3, we continued to generate strong growth and execute on all fronts. Our teams drove share gains in automotive and rail, large project growth and aftermarket demand in pumps and valves, and growth in aerospace and defense. Once again, we delivered strong year-over-year and sequential segment margin expansion, and are accelerating towards our 20% long-term target. We also generated more than $350 million of cash flow this year, acquired Svanehøj to grow our flow portfolio, and will continue to put our cash to work with further M&A opportunities and the new $1 billion share repurchase program we announced in October. As a result of this performance, today we are raising our 2023 outlook for the third straight quarter. We continue to execute at a new level of earnings, profitability and cash, whilst reinvesting in our businesses and growing through acquisitions to deliver long-term value,” said ITT’s Chief Executive Officer and President Luca Savi.
2023 Guidance
ITT now expects revenue growth of approximately 9%, up 7% to 8% on an organic basis; segment operating margin of 17.9% to 18.5% and adjusted segment operating margin of 18.3% to 18.9%, up 110 bps to 170 bps; EPS of $5.05 to $5.11 and adjusted EPS of $5.15 to $5.21, up 16% to 17% for the full year; and free cash flow of over $400 million, representing approximately 12% free cash flow margin for the full year 2023.
Explore the complete 8-K earnings release (here) from ITT Inc for further details.
