ITT raises 2025 EPS outlook to $6.65 amid robust margin expansion and strong cash flow

Earnings Call Insights: ITT Inc. (ITT) Q3 2025

MANAGEMENT VIEW

* Luca Savi, CEO, President & Director, highlighted a quarter of organic growth, margin expansion, and M&A momentum, noting, "In Q3, we delivered nearly $1 billion of total orders for the third consecutive quarter, up 3%, bolstered once again by the strong order intake from our kSARIA and Svanehøj acquisitions. We grew revenue 13% total and 6% organic with all segments contributing to $999 million." He emphasized, "Adjusted EPS grew 21%, and we grew free cash flow 46% to $368 million year-to-date and now expect to be at the high end of our previous range at $0.5 billion for the full year."
* Savi reported that product innovation remains a focus: "We also continue to fund innovations like VIDAR, our game-changing industrial motor. VIDAR is installed with 3 large energy companies in North America. And now we have begun shipping Goulds Pumps with VIDAR motors."
* Savi announced a management change: Mark Macaluso, Vice President of Investor Relations and Global Communications, will be leaving ITT later in the week.
* Emmanuel Caprais, Senior VP & CFO, stated, "ITT delivered another strong performance in the third quarter. We saw a step-up in growth with organic revenue, EPS and free cash flow well ahead of our initial expectations." Caprais also said, "The profitable growth drove adjusted EPS to $1.78, up 21% year-over-year."

OUTLOOK

* Caprais provided revised guidance: "On revenue, our total growth is now expected to be slightly higher at 6% to 7%, while organic revenue remains within our prior range of 3% to 5%."
* He added, "On EPS, we're raising the midpoint of our guidance by $0.20 to $6.65, another step change in our EPS outlook for the year with a $0.27 increase at the low end and $0.13 improvement at the high end."
* The company now expects to deliver $500 million in free cash flow and a 13% margin for the full year.
* For Q4, Caprais shared, "We expect high single-digit growth in revenue of mid-single-digit growth on an organic basis led by strong performances in Connect & Control and Industrial Process...This should collectively drive EPS growth just below 20% for the quarter."

FINANCIAL RESULTS

* Revenue reached $999 million, with all segments contributing to a 13% total and 6% organic growth.
* Operating margin expanded 110 basis points excluding M&A, with IP margins up 70 basis points to nearly 22%, Svanehøj EBITDA margin above 20%, and CCT margin up 270 basis points excluding kSARIA dilution.
* Adjusted EPS was $1.78, up 21% year-over-year.
* Free cash flow year-to-date was $368 million, with a free cash flow margin in the quarter above 15%.
* Share repurchases of $500 million were completed year-to-date.

Q&A

* Michael Halloran, Robert W. Baird & Co., asked about global auto production trends and IP funnel momentum. Savi responded, "Auto production will be overall up 2% year-over-year at 91 million vehicles produced. Once again, it's a China story. China up whilst Europe and North America are forecasted to be down low single digit."
* Halloran also asked about the IP funnel. Savi replied, "The funnel is up sequentially...by 22%. And...without energy, the funnel is also up year-over-year by a healthy 9%."
* Jeffrey Hammond, KeyBanc, inquired about the $0.20 guidance raise. Caprais explained, "We raised our guidance -- full-year guidance EPS by $0.20...In Q4, we're benefiting from higher revenue and improved margin from all the businesses...and then we have a tax rate impact also that is positive, that is around $0.01."
* Vladimir Bystricky, Citi, sought clarity on IP short cycle orders and regional dynamics. Caprais answered, "We had strong activity in parts as well as in valves...Valves was very strong."
* Matt Summerville, D.A. Davidson, asked about aftermarket focus and high-performance/VIDAR ramp. Savi shared, "Aftermarket, we are staying in Europe...the aftermarket probably is the only area where we saw some decline, and that is mainly -- is a market related that is not a share conversation to be had there." On VIDAR, "We are still committed to $150 million of sales by 2030 and a 10% market share on a $6 billion market in the long term."
* Damian Karas, UBS, asked about project deferrals in IP. Savi replied, "Not really, not material...the funnel has gone up sequentially by quite a bit."

SENTIMENT ANALYSIS

* Analysts' tone was neutral to slightly positive, with questions focused on guidance clarity, order sustainability, and margin progression. There was some probing on market trends, but no overt skepticism.
* Management maintained a confident and upbeat tone in prepared remarks and Q&A, with Savi stating, "We are compounding this growth with M&A as our acquisitions performed well ahead of expectations." Caprais consistently highlighted strong execution and operational improvements.
* Compared to the previous quarter, analyst tone was similarly constructive, while management's confidence increased due to stronger-than-expected margin and EPS performance.

QUARTER-OVER-QUARTER COMPARISON

* Guidance for full-year adjusted EPS was raised to a midpoint of $6.65 from $6.45 in Q2, and free cash flow outlook moved to $500 million at the high end of the previous range.
* Revenue growth accelerated from 7% total in Q2 to 13% in Q3, and adjusted EPS growth rose from 10% in Q2 to 21% in Q3.
* Management's language shifted from cautious optimism in Q2 to stronger confidence in Q3, with repeated emphasis on outperforming initial expectations and successful integration of acquisitions.
* Analysts' focus in both quarters remained on order sustainability, margin drivers, and the impact of acquisitions, but Q3 included more detailed inquiries about guidance drivers and regional trends.

RISKS AND CONCERNS

* Management cited the impact of a destructive storm at the Brazil plant, though production resumed quickly.
* Savi acknowledged aftermarket softness in Europe, noting it was market-driven rather than share-related.
* Caprais addressed potential order volatility, especially after large first-half orders for Svanehøj, and suggested growth would normalize but remain strong.
* No major project deferrals or order pushouts were reported, and management indicated robust pipelines in key regions.
* Analysts raised questions regarding chip shortages and production declines in Europe and North America, but management reported no current direct impact from customers.

FINAL TAKEAWAY

ITT reported a quarter of strong revenue, EPS, and margin growth, supported by robust performance in all business segments and successful contributions from recent acquisitions. Confidence in the outlook led to a raised full-year EPS guidance to $6.65 and higher free cash flow expectations. Management highlighted continued share gains, a healthy project pipeline, and ongoing investments in innovation, positioning the company for sustained growth through 2026 and beyond.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/itt/earnings/transcripts]

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