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ITT INC. (ITT)·Q2 2025 Earnings Summary

Executive Summary

  • ITT delivered a clean beat and raise: Q2 revenue $972.4M and adjusted EPS $1.64 vs S&P Global consensus ~$948.5M and ~$1.61, respectively, driven by strong IP project shipments, CCT pricing/M&A, and MT share gains; operating margin expanded to 18.0% (18.4% adj.) . Estimates marked with asterisk are from S&P Global data.*
  • Orders topped $1.0B for the second straight quarter (total $1,074M; +16% reported, +13% organic), book-to-bill ~1.1, and backlog “nearly $2B,” setting up H2 conversion .
  • Guidance raised: 2025 total revenue growth to 5–7% (from 2–4%) and adjusted EPS to $6.35–$6.55 (from $6.10–$6.50) on better H1 execution and less volatile outlook; adjusted operating margin narrowed to 18.1–18.7% (from 18.1–19.0%) on mix/amortization .
  • Key catalysts: improving orders trajectory in IP (projects) and CCT (defense/aero), pricing power, easing tariff headwind (now ~$25M gross vs ~$50–60M prior) with planned mitigation, and M&A accretion momentum (Svanehøj, kSARIA) .

What Went Well and What Went Wrong

  • What Went Well

    • Broad-based execution: operating income rose 10% YoY, adjusted EPS +10% to $1.64 on productivity, pricing, and acquisitions; all segments grew organically; cash from ops $154M; FCF $137M with 14% FCF margin in Q2 .
    • Segment strength: IP margin to 21.5% (+140 bps) on pricing/productivity/volume; CCT total revenue +31% (kSARIA), with legacy CCT margin expansion via strategic pricing; MT margin +100 bps to 19.5% on productivity .
    • Orders/backlog quality: total orders $1,074M (+16%); IP orders +25% with share gains (Bornemann), CCT defense/aero awards, and MT wins across electrified platforms; backlog “nearly $2B,” +34% YoY .

  • What Went Wrong

    • Mix/Amortization drag: Adjusted operating margin guide narrowed/lowered high-end (18.1–18.7%) due to mix (Svanehøj fast growth dilutive near-term) and higher M&A-related costs; temporary amortization at kSARIA remains through Q4 .
    • FX headwinds: Unfavorable FX transaction effects pressured MT margins despite operational gains; management cited USD weakness as a transaction headwind .
    • Higher tax and interest expense weighed on reported EPS vs adjusted: Q2 included other tax special items (+$6.6M) and higher interest expense, tempering GAAP EPS growth to $1.52 .

Financial Results

Overall results vs prior periods and Street

MetricQ2 2024Q1 2025Q2 2025 ActualQ2 2025 Street Consensus*
Revenue ($USD Millions)$905.9 $913.0 $972.4 $948.5*
Diluted EPS ($)$1.45 $1.33 $1.52 $1.61*
Adjusted EPS ($)$1.49 $1.45 $1.64 $1.61* (Primary EPS)
Operating Margin (%)17.6% 16.5% 18.0% —
Adjusted Operating Margin (%)18.1% 17.4% 18.4% —
Net Cash from Ops ($M)$157.7 $113.4 $153.7 —
Free Cash Flow ($M)$134.5 $76.6 $137.3 —
Free Cash Flow Margin (%)14.8% 8.4% 14.1% —

Notes: Consensus from S&P Global; Primary EPS treated as adjusted EPS proxy.* Values retrieved from S&P Global.

Segment performance (Q2 2025)

SegmentRevenue ($M)YoY Reported %Organic Growth %Operating Income ($M)YoY Reported Change %Operating Margin %YoY Change (bps)
Motion Technologies365.7 (4.9)% 3.0% 71.2 —% 19.5% +100 bps
Industrial Process355.9 7.6% 5.5% 76.6 15.2% 21.5% +140 bps
Connect & Control Tech251.9 31.3% 4.5% 44.9 26.8% 17.8% (70) bps

KPIs and orders

KPIQ2 2024Q1 2025Q2 2025
Total Orders ($USD Millions)$929.3 $1,046.5 $1,074.2
Organic Orders Growth YoY (%)—2.5% 12.5%
Book-to-Bill (approx.)—~1.15 (commentary) ~1.1 (commentary)

Guidance Changes

MetricPeriodPrevious Guidance (Q1 2025)Current Guidance (Q2 2025)Change
Total Revenue GrowthFY 20252%–4% 5%–7% Raised
Organic Revenue GrowthFY 20253%–5% 3%–5% (unchanged) Maintained
Operating Margin (GAAP)FY 202517.5%–18.4% 17.5%–18.1% Narrowed/Lowered high end
Adjusted Operating MarginFY 202518.1%–19.0% 18.1%–18.7% Narrowed/Lowered high end
EPS (GAAP)FY 2025$5.80–$6.20 $5.95–$6.15 Raised low end
Adjusted EPSFY 2025$6.10–$6.50 $6.35–$6.55 Raised
Free Cash Flow ($M)FY 2025$450–$500 $450–$500 Maintained
Dividend (Quarterly)Q3 2025$0.351/share (Q2 date) $0.351/share, payable Sep 29; record Sep 2 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Pricing power and margin expansionLegacy CCT approaching 20% excl. M&A; IP ~22% excl. M&A; pricing offsetting inflation CCT strategic pricing adds ~450 bps margin; margin up YoY ex-M&A; IP margin 21.5% (+140 bps) Improving
Tariffs and mitigationGross 2025 exposure estimated $50–60M (remaining 9 months), to be offset by price/productivity; no EPS impact Gross 2025 exposure now ~ $25M; mitigation via price/productivity; no material 2025 impact Easing headwind
IP project funnel/backlogIP backlog ~$1B; funnel elevated but down YoY; strong share gains Orders strength; some delays but no major shifts; mix now 58% projects/42% short-cycle; closing margins > booking margins Solid conversion, mix headwind managed
Defense/Aerospace in CCTLarge platform awards (e.g., F-35) and defense-led growth; aerospace recovering later in year Defense and aero orders strong; connectors order growth double-digit; supporting Boeing 737 MAX ramp Positive momentum
Innovation/AI/TechnologyVIDAR launched; energy savings >50% in trials; go-to-market outlined VIDAR “Unveiled” event; initial orders >$1M; trials with two oil majors; shipments started Scaling early
M&A executionSvanehøj and kSARIA accretive; 2025 accretion ~$0.20; amortization ending Svanehøj April; kSARIA by YE Svanehøj revenue +30% FY; orders >80% 1H; Katsa performing; pipeline targets $200–$400M revenue range; amortization for Katsa ends Q4 Positive

Management Commentary

  • “Once again, we surpassed $1 billion of orders and entered Q3 with nearly $2 billion in backlog… All segments grew revenues organically whilst operating income grew over twice the rate of sales growth… we are raising our revenue and EPS guidance for 2025.” — Luca Savi, CEO .
  • “IP grew margin 100 basis points to nearly 22%, driven by volume, productivity, and price… CCT grew margin 270 bps, excluding M&A dilution, driven mainly by strategic pricing actions.” — Prepared remarks .
  • “We are raising the midpoint of our guidance by $0.15 to $6.45… improved productivity and FX benefits, partially offset by unfavorable mix and higher M&A-related costs.” — CFO Emmanuel Caprais .

Q&A Highlights

  • IP projects/funnel: Management sees healthy funnel with minor pushouts; share gains (e.g., Bornemann twin-screw pumps) underpin orders; backlog mix shifted to 58% projects, 42% short-cycle, with project closing margins above booking margins .
  • CCT orders and pricing: Strong defense/aero demand; legacy CCT and Katsa both growing; strategic and inflation-recovery pricing drove ~450 bps margin benefit; automation underway in machining/valves plants .
  • MT margins/FX: Transaction FX headwinds pressured MT, but productivity lifted margin to 19.5%; outperformance across regions and powertrains (ICE/hybrid/EV) .
  • Tariffs: 2025 gross impact now ~$25M vs prior $50–60M; pricing and productivity expected to fully offset; no material EPS impact .
  • Outlook cadence: Q3 expected low-single-digit organic growth, slight YoY margin expansion, and low-teens EPS growth YoY; similar organic growth cadence implied for Q4 .

Estimates Context

  • Q2 vs consensus: Revenue $972.4M vs ~$948.5M*; Primary/Adjusted EPS $1.64 vs ~$1.61*; EBITDA ~$213.8M vs ~$208.6M* — beats on all three. Drivers: IP project shipments (incl. Svanehøj), CCT pricing and M&A, MT share gains and productivity . Values retrieved from S&P Global.*
  • Q1 vs consensus: Revenue $913.0M vs ~$907.5M*; EPS $1.45 vs ~$1.44* — modest beats aided by pricing and productivity . Values retrieved from S&P Global.*
  • FY 2025 consensus: Revenue ~$3.88B*; Primary EPS ~$6.65* vs updated adj. EPS guide $6.35–$6.55 — management’s midpoint is slightly below Street EPS but above prior guide; revenue growth raised to 5–7% supports potential revenue estimate upward bias . Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Beat-and-raise with quality: Strong IP project margins, CCT pricing, and MT productivity drove EPS above Street; raised FY revenue and EPS guide is a positive catalyst .
  • Mix and amortization temper margin ceiling: Adjusted operating margin guide narrowed on mix (Svanehøj growth) and temporary amortization, but ex-M&A margin expansion remains >100 bps for the year per management .
  • Orders/backlog support H2: Consecutive $1B+ order quarters, book-to-bill >1, and backlog near $2B provide visibility; watch IP conversion and CCT aero recovery .
  • Tariff risk de-risked: 2025 gross tariff exposure halved to ~$25M with planned pricing/productivity offset; monitoring timing effects to cash flow remains prudent .
  • M&A accretion compounding: Svanehøj and Katsa trending ahead; management targeting ~$200–$400M revenue deals; amortization headwind fades by Q4 (Katsa) .
  • Short-term trading: Positive sentiment likely from beat/raise and tariff de-risking; near-term watch items are FX transaction impacts on MT and CCT amortization dilution .
  • Medium-term thesis: Structural pricing power, IP share gains, and innovation (VIDAR) support sustained growth/margin expansion; conversion of elevated backlog and disciplined M&A are key to achieving 2030 targets .

Footnote: All consensus estimates and “Primary EPS” figures marked with an asterisk are values retrieved from S&P Global.*