ITT (ITT)

Engineered components manufacturer for critical industries ITT Inc. (NYSE: ITT) announced better-than-expected revenue in Q3 CY2025, with sales up 12.9% year on year to $999.1 million. Its non-GAAP profit of $1.78 per share was 6.7% above analysts’ consensus estimates.

Company Overview

Playing a crucial role in the development of the first transatlantic television transmission in 1956, ITT (NYSE:ITT) provides motion and fluid handling equipment for various industries

Gas and liquid handling companies possess the technical know-how and specialized equipment to handle valuable (and sometimes dangerous) substances. Lately, water conservation and carbon capture–which requires hydrogen and other gasses as well as specialized infrastructure–have been trending up, creating new demand for products such as filters, pumps, and valves. On the other hand, gas and liquid handling companies are at the whim of economic cycles. Consumer spending and interest rates, for example, can greatly impact the industrial production that drives demand for these companies’ offerings.

Competitors offering similar products include Illinois Tool Works (NYSE:ITW), Colfax (NYSE:CFX), and Fronius (private).

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Luckily, ITT’s sales grew at a decent 8.9% compounded annual growth rate over the last five years. Its growth was slightly above the average industrials company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. ITT’s annualized revenue growth of 8.7% over the last two years aligns with its five-year trend, suggesting its demand was stable.

ITT also reports organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, ITT’s organic revenue averaged 5.2% year-on-year growth. Because this number is lower than its two-year revenue growth, we can see that some mixture of acquisitions and foreign exchange rates boosted its headline results.

This quarter, ITT reported year-on-year revenue growth of 12.9%, and its $999.1 million of revenue exceeded Wall Street’s estimates by 2.6%.

Looking ahead, sell-side analysts expect revenue to grow 5.2% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and suggests its products and services will face some demand challenges. At least the company is tracking well in other measures of financial health.

ITT’s gross margin is good compared to other industrials businesses and signals it sells differentiated products, not commodities. As you can see below, it averaged an impressive 33.3% gross margin over the last five years. That means for every $100 in revenue, roughly $33.26 was left to spend on selling, marketing, R&D, and general administrative overhead.

ITT’s gross profit margin came in at 35.6% this quarter, in line with the same quarter last year. On a wider time horizon, the company’s full-year margin has remained steady over the past four quarters, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

ITT has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 17.5%. This result isn’t too surprising as its gross margin gives it a favorable starting point.

Looking at the trend in its profitability, ITT’s operating margin decreased by 2.3 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q3, ITT generated an operating margin profit margin of 18%, down 5.5 percentage points year on year. Since ITT’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

ITT’s EPS grew at a spectacular 14.9% compounded annual growth rate over the last five years, higher than its 8.9% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into the nuances of ITT’s earnings can give us a better understanding of its performance. A five-year view shows that ITT has repurchased its stock, shrinking its share count by 9.3%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For ITT, its two-year annual EPS growth of 12.1% was lower than its five-year trend. We still think its growth was good and hope it can accelerate in the future.

In Q3, ITT reported adjusted EPS of $1.78, up from $1.46 in the same quarter last year. This print beat analysts’ estimates by 6.7%. Over the next 12 months, Wall Street expects ITT’s full-year EPS of $6.37 to grow 10.7%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

ITT has shown impressive cash profitability, enabling it to ride out cyclical downturns more easily while maintaining its investments in new and existing offerings. The company’s free cash flow margin averaged 9% over the last five years, better than the broader industrials sector.

Taking a step back, we can see that ITT’s margin expanded by 18.6 percentage points during that time. This is encouraging, and we can see it became a less capital-intensive business because its free cash flow profitability rose while its operating profitability fell.

ITT’s free cash flow clocked in at $201.6 million in Q3, equivalent to a 20.2% margin. This result was good as its margin was 10.3 percentage points higher than in the same quarter last year, building on its favorable historical trend.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

ITT’s five-year average ROIC was 20.3%, placing it among the best industrials companies. This illustrates its management team’s ability to invest in highly profitable ventures and produce tangible results for shareholders.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, ITT’s ROIC has decreased over the last few years. Only time will tell if its new bets can bear fruit and potentially reverse the trend.

ITT reported $516.4 million of cash and $995.7 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $825.4 million of EBITDA over the last 12 months, we view ITT’s 0.6× net-debt-to-EBITDA ratio as safe. We also see its $17.5 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We enjoyed seeing ITT beat analysts’ organic revenue expectations this quarter. We were also glad its revenue outperformed Wall Street’s estimates. Looking ahead, EPS guidance for the full year was also raised. Zooming out, we think this quarter featured some important positives. The stock traded up 3.5% to $182.28 immediately after reporting.

Updated: December 4, 2025 at 10:23 PM EST

Before making an investment decision, investors should account for ITT’s business fundamentals and valuation in addition to what happened in the latest quarter.

ITT is a fine business. First off, its revenue growth was good over the last five years. And while its diminishing returns show management's recent bets still have yet to bear fruit, its rising cash profitability gives it more optionality. On top of that, its stellar ROIC suggests it has been a well-run company historically.

ITT’s P/E ratio based on the next 12 months is 24.7x. Looking at the industrials landscape right now, ITT trades at a pretty interesting price. If you’re a fan of the business and management team, now is a good time to scoop up some shares.

Wall Street analysts have a consensus one-year price target of $208.91 on the company (compared to the current share price of $183.41), implying they see 13.9% upside in buying ITT in the short term.