Itt Inc Files For Mixed Shelf, Size Not Disclosed - Sec Filing

Investors with an interest in Diversified Operations stocks have likely encountered both Swire Pacific (SWRAY) and ITT (ITT). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Swire Pacific has a Zacks Rank of #1 (Strong Buy), while ITT has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that SWRAY likely has seen a stronger improvement to its earnings outlook than ITT has recently. But this is just one piece of the puzzle for value investors.

Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.

Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

SWRAY currently has a forward P/E ratio of 9.29, while ITT has a forward P/E of 23.96. We also note that SWRAY has a PEG ratio of 0.57. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. ITT currently has a PEG ratio of 1.85.

Another notable valuation metric for SWRAY is its P/B ratio of 0.76. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, ITT has a P/B of 4.14.

These metrics, and several others, help SWRAY earn a Value grade of A, while ITT has been given a Value grade of D.

SWRAY stands above ITT thanks to its solid earnings outlook, and based on these valuation figures, we also feel that SWRAY is the superior value option right now.

Zacks Investment Research

Markel Group Inc. MKL reported third-quarter 2024 net operating earnings per share of $17.34, which missed the Zacks Consensus Estimate by 21%. However, the bottom line increased 4.7% year over year.

Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

Markel’s third-quarter results reflected improved net investment income, reduced operating expenses and more favorable development on prior accident years loss reserves, offset by lower earned premiums.

Markel Group Inc. Price, Consensus and EPS Surprise

Markel Group Inc. price-consensus-eps-surprise-chart | Markel Group Inc. Quote

Quarterly Operational Update

Total operating revenues of $3.7 billion missed the Zacks Consensus Estimate by 1.3%. The top line rose 1.4% year over year on higher product revenues, services and other revenues and higher net investment income.

Earned premiums decreased 1% year over year to $2.1 billion in the quarter. The modest decrease was due to lower gross premium volume in the Reinsurance segment. The figure was lower than our estimate of $2.2 billion.

Net investment income increased 22% year over year to $233.3 million in the third quarter. The rise was due to higher interest rates and increased investment holdings in 2024. The figure was higher than our estimate of $217.6 million and the Zacks Consensus Estimate of $216 million.

Total operating expenses of Markel decreased 1.9% year over year to $3.2 billion, primarily due to lower losses and loss adjustment expenses and amortization of intangible assets. The figure matched our estimate.

MKL’s combined ratio improved 270 basis points (bps) year over year to 96.4 in the reported quarter. Excluding losses attributed to natural catastrophes, the decrease in the consolidated combined ratio was primarily attributable to more favorable development on prior accident years loss reserves within the Insurance segment. The figure matched the Zacks Consensus Estimate.

Segment Update

Insurance: Gross premiums increased 2% year over year to $2.4 billion. The uptick was driven by new business growth and more favorable rates within personal lines, programs, marine and energy and credit and surety product lines. It was partially offset by lower premium volume within select lines of U.S. general liability and professional liability product lines. The figure matched our estimate.

Underwriting profit came in at $109.5 million, which surged more than four-fold year over year. The combined ratio improved 450 bps year over year to 94.1. It included $61 million of net losses and loss adjustment expenses attributed to Hurricane Helene.

Reinsurance: Gross premiums decreased 4% year over year to $121.1 million. The decrease was driven by the impact of unfavorable premium adjustments within credit and surety and general liability product lines in 2024 compared to favorable premium adjustments in 2023. It was partially offset by new business within professional liability product lines. The figure was lower than our estimate of $383.3 million.

Underwriting loss was $33.5 million, wider than a loss of $5.8 million reported in the year ago. The combined ratio deteriorated 1,130 bps year over year to 113.4 in the third quarter.

Markel Ventures: Operating revenues of $1.2 billion improved 1% year over year. The increase in operating revenues was primarily driven by the impact of higher prices at one of consumer and building products businesses and increased demand at equipment manufacturing businesses, as well as the contribution from Valor, which was acquired in June 2024. The improvements in operating revenues were largely offset by the impact of decreased demand and lower prices across a number of other businesses, most notably at one of transportation-related businesses.

Operating income of $106.6 million decreased 18% year over year due to the impact of lower revenues and operating margins across a number of businesses, most notably at one of transportation-related businesses and construction services businesses. The decreases in segment operating income were partially offset by the impact of higher revenues and operating margins at equipment manufacturing businesses and one of consumer and building products businesses.

Financial Update

Markel exited the third quarter with investments, cash and cash equivalents and restricted cash and cash equivalents of $34.6 billion as of Sept. 30, 2024, up 12% from 2023-end.

The debt balance increased 15.2% year over year to $4.3 billion as of Sept. 30, 2024. The debt-to-capital ratio was 20% as of Sept. 30, 2024, which remained unchanged from 2023-end.

Shareholders' equity was $17 billion at third-quarter 2024-end, up 13.5% from 2023-end.

Net cash provided by operating activities was $2.1 billion in the first nine months of 2024, up 7% year over year.

Zacks Rank

Markel currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Some Other Conglomerates

Honeywell International Inc. HON reported third-quarter 2024 adjusted earnings of $2.58 per share, which surpassed the Zacks Consensus Estimate of $2.50. The bottom line increased 8% year over year on an adjusted basis. On a reported basis, the company’s earnings were $2.16 per share, down 5%. Total revenues of $9.73 billion missed the consensus estimate of $9.90 billion. The top line increased 6% from the year-ago quarter, driven by strength in the Aerospace Technologies segment. Organic sales also increased 3% year over year.

Aerospace Technologies’ quarterly revenues were $3.91 billion, up 12% year over year. Our estimate for the segment’s revenues was $3.95 billion. Industrial Automation revenues fell 5% year over year to $2.50 billion. Our estimate for segmental revenues was pegged at $2.62 billion. Building Automation revenues totaled $1.75 billion, up 14% year over year. Our estimate for the segment’s revenues was $1.70 billion.

ITT Inc. ITT third-quarter 2024 adjusted earnings of $1.46 per share surpassed the Zacks Consensus Estimate of $1.43. The bottom line jumped 7% year over year. Total revenues of $885.2 million beat the consensus estimate of $876 million. The top line increased 7.7% year over year. Organic sales rose approximately 5.5% year over year, buoyed by higher friction original equipment volume and rail demand in KONI in the Motion Technologies segment.

Revenues from the Industrial Process segment totaled $333.8 million, up 19.3% year over year. Organic sales increased 6.1% and adjusted operating income grew 7.1% on a year-over-year basis. Our estimate for segmental revenues was pinned at $321.6 million. Revenues from the Motion Technologies segment amounted to $344.9 million, implying a year-over-year decrease of 4.1%. The lower sales were attributable to the divestiture of the Wolverine unit in July 2024. Organic revenues grew 4.7%. Adjusted operating income increased 2.1%. Our estimate for segmental revenues was pinned at $360.6 million.

3M Company MMM reported third-quarter 2024 results, wherein revenues and earnings surpassed the Zacks Consensus Estimate. Both the bottom and top lines increased on a year-over-year basis. 3M delivered adjusted earnings of $1.98 per share, which surpassed the Zacks Consensus Estimate of $1.93. The metric increased from $1.68 per share reported in the year-ago quarter.

The company’s net revenues of $6.3 billion surpassed the consensus estimate of $6.1 billion. The metric increased 0.4% year over year. Organic sales declined 0.1%. Foreign currency translation had a negative impact of 0.3%, while divestitures boosted the top line by 0.8%. Region-wise, organic sales in the Americas inched up 0.3% year over year, while Asia Pacific organic sales increased 1.7%. Organic sales from businesses in Europe, the Middle East and Africa decreased 4.2%.

Zacks Investment Research

ITT Inc.’s ITT third-quarter 2024 adjusted earnings of $1.46 per share surpassed the Zacks Consensus Estimate of $1.43. The bottom line jumped 7% year over year, aided by an increase in sales across most of its segments. Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

Total revenues of $885.2 million beat the consensus estimate of $876 million. The top line increased 7.7% year over year. Organic sales rose approximately 5.5% year over year, buoyed by higher friction original equipment volume and rail demand in KONI in the Motion Technologies segment.

Also, short cycle demand in the Industrial Process segment and industrial connectors growth in the Connect & Control Technologies segment aided the results. The acquisitions of Svanehøj and kSARIA contributed 7% to the top line, while the divestiture of Wolverine business had an adverse impact of 4%.

ITT’s Segmental Results

Revenues from the Industrial Process segment totaled $333.8 million, up 19.3% year over year. Strength in pump projects, solid demand for aftermarket parts and services and the buyout of Svanehøj drove the segment’s performance. Organic sales increased 6.1% and adjusted operating income grew 7.1% on a year-over-year basis. Our estimate for segmental revenues was pinned at $321.6 million.

Revenues from the Motion Technologies segment amounted to $344.9 million, implying a year-over-year decrease of 4.1%. The lower sales were attributable to the divestiture of the Wolverine unit in July 2024. Higher sales volume in friction original equipment and rail demand in the KONI business aided the segmental performance. Organic revenues grew 4.7%. Adjusted operating income increased 2.1%. Our estimate for segmental revenues was pinned at $360.6 million.

Revenues from the Connect & Control Technologies segment of $207.2 million rose 12.6% year over year on a reported basis and 5.7% organically. Our estimate was $195.5 million. The results were driven by positive contribution from the buyout of kSARIA in September 2024. Favorable pricing actions and growth defense and industrial connectors also aided the segment’s performance. Adjusted operating income increased 17.9% year over year.

ITT Inc. Price, Consensus and EPS Surprise

ITT Inc. price-consensus-eps-surprise-chart | ITT Inc. Quote

ITT’s Margin Profile

ITT’s cost of revenues increased 5.3% year over year to $571.2 million. The gross profit jumped 12.4% to $314 million.

General and administrative expenses grew 11.8% year over year to $74.8 million. Sales and marketing expenses rose 13.7% to $50.5 million. Research and development expenses increased 14.4% year over year to $28.6 million.

Adjusted operating income climbed 11.1% year over year to $161.6 million. The margin expanded 60 basis points to 18.3%.

Balance Sheet and Cash Flow

Exiting the third quarter, ITT had cash and cash equivalents of $460.9 million compared with $489.2 million at the end of fourth-quarter 2023. The company’s short-term borrowings were $362.6 million compared with $187.7 million at the end of December 2023.

In the first nine months of 2024, ITT generated net cash of $339.4 million from operating activities compared with $367.6 million in the year-ago period. Capital expenditure totaled $87.5 million in the same period, up 27.7% year over year. Free cash flow was $251.9 million in the first nine months of the year compared with $299.1 million in the prior-year period.

During the first nine months of the year, ITT paid out dividends of $78.7 million, up 9.5% year over year. It repurchased shares worth $104 million compared with $60 million in the year-ago period.

ITT's 2024 Outlook

ITT has raised its financial outlook for 2024. The company expects adjusted earnings to be in the range of $5.80-$5.86 per share, higher than $5.65-$5.90 anticipated earlier. The guided range indicates an increase of 11-12% from the prior-year reported actuals.

Management projects revenue growth to be in the band of 10-12% (5-7% organically). Adjusted segment operating margin is estimated to be between 17.4% and 17.7%. Free cash flow is predicted to be about $450 million. This indicates a free cash flow margin of 12%.

Zacks Rank & Key Picks

ITT currently carries a Zacks Rank #3 (Hold). Some better-ranked companies are discussed below:

Markel Group Inc. MKL currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

MKL delivered a trailing four-quarter average earnings surprise of 35.4%. In the past 60 days, the Zacks Consensus Estimate for Markel’s 2024 earnings has increased 1.8%.

3M Company MMM presently carries a Zacks Rank of 2. 3M delivered a trailing four-quarter average earnings surprise of 9.6%.

In the past 60 days, the Zacks Consensus Estimate for MMM’s 2024 earnings has moved north 1.1%.

Crane Company CR currently carries a Zacks Rank of 2. CR delivered a trailing four-quarter average earnings surprise of 7.5%.

In the past 60 days, the consensus estimate for Crane’s 2024 earnings has inched up 0.4%.

Zacks Investment Research