WHITE PLAINS, N.Y.--(BUSINESS WIRE)--Aug 3, 2018--ITT Inc. (NYSE:ITT) today reported 2018 second-quarter financial results that reflect strong top-line growth and the company’s continued focus on operational execution and strategies to win share in key global end markets. “For the second consecutive quarter, ITT delivered record results and double-digit growth across a number of key metrics including revenue, adjusted segment operating income and adjusted EPS,” said CEO and President Denise Ramos. “This performance was driven by our intense focus on optimizing execution, reflected in our strong productivity gains and the year-over-year adjusted margin expansion of 130 basis points, led by improvements of 350 basis points at Industrial Process and 280 basis points at Connect and Control Technologies. Our results also reflect our ability to drive growth and market share gains in strategic global end markets. As we move into the second half of 2018, we’ll continue to focus on advancing operational excellence while building on our momentum in target markets that will propel our future growth.”

Revenue and Orders

On a GAAP basis, the company delivered record quarterly revenue of $697 million, reflecting a 10 percent increase over the prior year, which included a 3 percent benefit from foreign exchange. Organic revenue (defined as total revenue excluding foreign exchange, acquisition and divestiture impacts) increased 7 percent with each segment delivering 5 percent or better organic revenue growth. The revenue growth was driven by strength in transportation and industrial end markets, particularly in automotive OEM friction and short-cycle baseline pumps and valves, partially offset by lower oil and gas activity. Organic orders grew 15 percent driven by oil and gas and chemical pump projects, strength in commercial aerospace and defense, and gains in global automotive friction.

Segment Operating Income

GAAP segment operating income increased 30 percent to $106 million on segment margins of 15.2 percent with strong results at each business segment. Adjusted segment operating income increased 21 percent to $108 million on adjusted segment operating margins of 15.5 percent, an improvement of 130 basis points. The growth reflects higher volumes at each segment, solid net operating productivity that more than offset cost increases, improved performance on pump projects and favorable foreign exchange, which was partially offset by growth investments. In addition, the 2017 second-quarter results included estimated impacts from restrictions on sales of certain military-specification connectors. The GAAP segment operating income comparison further benefited from the impact of a legal accrual recorded during second-quarter of 2017.

Earnings Per Share

GAAP EPS increased 46 percent to $0.79. Adjusted EPS increased 26 percent to $0.82, reflecting the growth in adjusted segment operating income and favorable impacts from a lower non-U.S. tax rate, partially offset by unfavorable environmental and corporate cost comparisons, primarily related to incentive compensation. GAAP EPS benefited from favorable tax adjustments and lower realignment costs.

Guidance

The company is raising its previously announced 2018 full-year organic revenue guidance to the new range of up 3 percent to up 5 percent primarily due to the strong year-to-date revenue and order growth. However, the company is maintaining its previously announced 2018 full-year total revenue guidance of up 5 percent to up 8 percent due to recent unfavorable foreign currency movements.

The company is raising the mid-point of its previously announced 2018 full-year adjusted EPS guidance by five cents to $3.10, which represents a 20 percent increase compared to the prior year. The updated adjusted EPS guidance range of $3.05 to $3.15 reflects improving market dynamics, volume, and additional net operating productivity, partially offset by higher commodity costs and unfavorable foreign currency. The company is raising and tightening its previously announced 2018 full-year GAAP EPS guidance to a new range of $3.32 to $3.44 reflecting operational strength and improving market conditions, as well as lower restructuring and realignment costs and tax expenses.

2018 Second-Quarter Business Segment Results

All quarterly results are compared with the respective prior-year period.

Motion Technologies

Total revenue increased 14 percent to $330 million, which includes an organic revenue increase of 7 percent and a 7 percent favorable impact from foreign exchange. The revenue results reflect share gains in automotive OEM brake pads in China and North America, strength in aftermarket shims at Wolverine, and share gains in China high-speed and European rail markets. Growth was partially offset by an anticipated decline in aftermarket brake pads due to phasing and destocking by European distributors. GAAP operating income increased 7 percent to $56 million, and adjusted segment operating income increased 9 percent to $57 million. Both increases reflect higher sales volume and operational productivity, with notable productivity improvements within the Wolverine business, and favorable impacts from foreign exchange, which were partially offset by unfavorable aftermarket product mix, pricing pressures, higher commodity costs, and strategic investments.

Industrial Process

Total revenue increased 6 percent to $203 million, and organic revenue increased 5 percent, reflecting double-digit growth in short-cycle baseline pumps and valves, partially offset by a project revenue decline of 3 percent due to prior-year oil and gas projects, partially offset by strong petrochemical activity. The growth in baseline pumps was due to strong general industrial, chemical, and mining demand. The growth in valves was driven by solid bio-pharmaceutical demand. GAAP and adjusted operating income increased more than 51 percent to $23 million, reflecting benefits from higher volumes, net operating productivity and continued project performance improvements, favorable short-cycle product mix, and favorable price that nearly offset higher material costs.

Connect and Control Technologies

Total revenue increased 10 percent to $164 million, and organic revenue increased 8 percent, reflecting double-digit growth in oil and gas connectors on strength in North America and the Middle East and growth in aerospace led by commercial aerospace components and rotorcraft. GAAP operating income increased 92 percent to $27 million and adjusted segment operating income increased 31 percent to $28 million. Both measures reflect benefits from higher volumes, improved productivity gains in connector operations, restructuring benefits driven by the CCT integration, and a beneficial comparison to unfavorable prior-year impacts from military-specification connectors. The GAAP operating income comparison benefited from a prior-year legal accrual.

Investor Call Today

ITT's senior management will host a conference call for investors today at 9 a.m. ET to review performance and answer questions. The briefing can be monitored live via webcast at the following address on the company's website: www.itt.com/investors and a replay of the webcast will be available for 90 days following the presentation. A replay will also be available telephonically from two hours after the webcast until Friday, August 17, 2018, at midnight.

For a reconciliation of GAAP to non-GAAP results, please refer to www.itt.com/investors or click here.

All references to EPS are defined as diluted earnings per share from continuing operations.

About ITT

ITT is a diversified leading manufacturer of highly engineered critical components and customized technology solutions for the transportation, industrial, and oil and gas markets. Building on its heritage of innovation, ITT partners with its customers to deliver enduring solutions to the key industries that underpin our modern way of life. ITT is headquartered in White Plains, N.Y., with employees in more than 35 countries and sales in a total of approximately 125 countries. The company generated 2017 revenues of $2.6 billion. For more information, visit www.itt.com.

Safe Harbor Statement

This release contains “forward-looking statements” intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions and projections about our business, future financial results and the industry in which we operate, and other legal, regulatory and economic developments. These forward-looking statements include, but are not limited to, future strategic plans and other statements that describe the company’s business strategy, outlook, objectives, plans, intentions or goals, and any discussion of future operating or financial performance.

We use words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “target,” “future,” “may,” “will,” “could,” “should,” “potential,” “continue,” “guidance” and other similar expressions to identify such forward-looking statements. Forward-looking statements are uncertain and to some extent unpredictable, and involve known and unknown risks, uncertainties and other important factors that could cause actual results to differ materially from those expressed or implied in, or reasonably inferred from, such forward-looking statements.

Where in any forward-looking statement we express an expectation or belief as to future results or events, such expectation or belief is based on current plans and expectations of our management, expressed in good faith and believed to have a reasonable basis. However, there can be no assurance that the expectation or belief will occur or that anticipated results will be achieved or accomplished. More information on factors that could cause actual results or events to differ materially from those anticipated is included in the Risk Factors section of the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other documents filed from time to time with the Securities and Exchange Commission.

The forward-looking statements included in this release speak only as of the date hereof. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

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