ITT Corporation Earnings: Increased Costs Strains Margins as Profit Drops

S&P 500 (NYSE:SPY) component ITT Corporation (NYSE:ITT) reported its results for the third quarter. ITT Corporation is a global multi-industry company that designs and manufactures engineered products and related services.

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ITT Earnings Cheat Sheet for the Third Quarter

Results: Net income for ITT Corporation fell to $78 million (42 cents per share) vs. $145 million (78 cents per share) a year earlier. This is a decline of 46.2% from the year earlier quarter.

Revenue: Rose 12.8% to $2.98 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: ITT reported adjusted net income of $1.17 per share. By that measure, the company was about in line with expectations as the mean analyst estimate was $1.18 per share. It beat the average revenue estimate of $2.85 billion.

Quoting Management: “We are proud of our team for remaining focused on serving our customers to deliver this strong performance, even while executing on the separation of ITT into three strongly positioned, independent companies. I want to thank all of our employees for their diligence and hard work over the last several months,” said Steve Loranger, ITT’s chairman, president and chief executive officer. “The transformation of ITT and the launch of ITT Exelis and Xylem are on track to occur on October 31. The necessary costs to successfully separate into three companies are in line with our previous forecast, and all three new companies are nicely capitalized for future growth.”

Key Stats:

Gross margin shrank 0.4 percentage point to 28.6%. The contraction appeared to be driven by increased costs, which rose 13.4% from the year earlier quarter while revenue rose 12.8%.

Revenue has risen the past four quarters. Revenue increased 10.4% to $3.02 billion in the second quarter. The figure rose 4.7% in the first quarter from the year earlier and climbed 5.8% in the fourth quarter of the last fiscal year from the year-ago quarter.

The company has now seen net income fall in each of the last three quarters. In the second quarter, net income fell 29.4% from the year earlier, while the figure fell 15.1% in the first quarter.

The company fell short of forecasts after beating estimates in the previous two quarters. In the second quarter, it topped the mark by 2 cents, and in the first quarter, it was ahead by 5 cents.

Looking Forward: Over the past ninety days, the average estimate for the fourth quarter has fallen from $1.44 per share to $1.30, indicating that analysts are growing pessisimistic about the company’s performance next quarter. For the fiscal year, the average estimate has moved down from $4.79 a share to $4.75 over the last ninety days.

Competitors to Watch: General Dynamics Corp. (NYSE:GD), Raytheon Company (NYSE:RTN), Lockheed Martin Corp. (NYSE:LMT), Kratos Defense & Security Solutions, Inc (NASDAQ:KTOS), Northrop Grumman Corp. (NYSE:NOC), The Boeing Company (NYSE:BA), L-3 Communications Hldgs., Inc. (NYSE:LLL), Goodrich Corporation (NYSE:GR), FLIR Systems, Inc. (NASDAQ:FLIR), and Environmental Tectonics Corp. (ETCC).

Investing Insights: Here’s Why Chipotle’s Stock Keeps Winning.

(Source: Xignite Financials)