Tuesday, December 1, 2020

A Small Cap Equity holding: ITT, Inc. (ITT, $72.76): “A New Drive Forward” by: Drew Kolz, AIM Student at Marquette University

ITT, Inc. (ITT, $72.76): “A New Drive Forward” 

By: Drew Kolz, AIM Student at Marquette University

Disclosure: The AIM Equity Fund currently holds this position. This article was written by

myself, and it expresses my own opinions. I am not receiving compensation for it and I have no

business relationship with any company whose stock is mentioned in this article



·      ITT, Inc. (NYSE: ITT) engages in the engineering of products and solutions for the industries of energy, transportation, and industrial markets. ITT sells their products to companies in the United States and EMEA. 

·      ITT has approximately $1.5 billion in available liquidity. They are showing a great effort to expand their financial flexibility in hopes of making more investments in the near future.

·      While the automotive industry overall suffered during the pandemic, ITT’s demand for their friction brake continues to rise. 

·      ITT is located in over 125 countries and has a set of very well diversified brand/product lines that has helped them weather the storm. 


Key Points:

A main strength of ITT is their strong balance sheet. With $782.3 million in cash, $490.2 million in short-term receivables, and over $1.5 billion in total liquidity, ITT has given itself a great opportunity to increase their market share. Given that so many other competitors in the automotive and aerospace industries have not been able to withstand the effects of the pandemic, increased acquisitions and mergers should be seen in the near future by ITT. 


Acquisitions made by the team in 2019 continue to produce great benefits for the company as a whole. The two acquisitions of RPG and Matrix Composites have led to direct increases in both production time and sales. With adjusted segment operating income increasing by 10.3% in 2019, it is very clear that their acquisitions had a direct impact on sales. This increase in adjusted segment operating income can be mainly attributed to the increased sales volume strength in project pumps and friction OEM share gains. 


ITT was one of many companies across the globe that were negatively affected by the pandemic. Given their business has a heavy reliance on the travel industries, they lost out on revenue due to the decreased demand for those industries. As the automotive and airline industries see an increased usage over time again, expect the demand for ITT’s products to increase as well. 


What has the stock done lately?

Over the past 3 months, the stock has generated a 18.65% return. The stock is currently trading at $72.76 and is trending towards exceeding its 52-week high of $75.56. This is great recovery from a YTD low of $35.41 that was reached in mid-March. As more positive news is released about the virus, one can assume that the stock price shall continue to rise in the near future. 


Past Year Performance: ITT has returned 5.34% over the past year. This number is slightly lower than the benchmark which returned 12.85% The pandemic has had a negative effect overall on this company, but they are closing out the year back at pre-pandemic levels. 


Source: Factset

My Takeaway: 

ITT was originally added to the portfolio with a target price of $65.22. After recovering all of the stock price losses from the pandemic, there is reason for optimism in the near future. ITT’s strong balance sheet and willingness to expand in the past suggests that they will continue to try and increase their market share. Furthermore, as the demand for their friction brake continues to rise, so should their share price. Given these opportunities, I recommend the AIM portfolio hold ITT.

Source: Factset