ITT (ITT)2023-02-09 17:34Financial Data and Key Metrics Changes - ITT reported a revenue growth of over 17%, driven by double-digit growth across all business segments [37][134] - The company achieved a record segment margin in Q4, overcoming approximately $50 million in cost inflation [35][138] - Adjusted EPS growth is expected to be 7% at the midpoint for 2023, with a strong focus on improving cash flow generation [13][142] Business Line Data and Key Metrics Changes - Industrial Process (IP) saw organic revenue growth of 27%, with project bookings increasing over 70% [4][37] - Connect and Control Technologies (CCT) grew sales by 16%, supported by strong demand in aerospace components [134][128] - Motion Technologies (MT) experienced a decline in margins to 14.7%, impacted by higher material and labor costs [137][100] Market Data and Key Metrics Changes - The rail business grew 10% organically, with orders up 35%, particularly strong in Europe [7] - The automotive market is expected to be flat to low single digits in 2023, with a slowdown anticipated in Europe during the second half [11][56] - Demand for EV connectors grew significantly, with orders reaching almost $40 million in 2022 [130] Company Strategy and Development Direction - The company is focusing on value-based pricing strategies and improving supply chain effectiveness to drive long-term value creation [9][43] - ITT is investing in new product development and innovation, particularly in electrification and clean energy projects [10][14] - The company aims to achieve a 30% global market share in the EV space by 2026, leveraging its competitive advantages [86][121] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for 2023, expecting strong performance in the first half but anticipating a slowdown in the second half due to economic conditions [57][142] - The company is committed to maintaining pricing discipline while navigating ongoing cost inflation and supply chain challenges [52][100] - Management highlighted the importance of execution and market share gains as key differentiators for future growth [44][144] Other Important Information - ITT announced a 10% increase in dividends and repurchased over $250 million of shares, reducing the share count by 3% [36] - The company is experiencing strong cash flow generation, with a free cash flow margin of 17% in Q4, the best performance of the year [35][129] - ITT's effective purchase multiple has decreased to 8-9x, down from approximately 12x at the time of acquisition [36] Q&A Session Summary Question: What are the expectations for price versus cost inflation in 2023? - Management indicated that while they were slightly price positive in Q3 and Q4 of 2022, they expect to maintain that in 2023 despite some headwinds from commodity costs [46] Question: Can you provide specific examples of growth in IP projects? - Management highlighted significant orders in energy projects, including initiatives in Nigeria, Angola, and Malaysia, indicating strong international growth [22] Question: What is the outlook for margins in Motion Technologies? - Management expects MT to return to high teens margins in the long term, although it may take longer than other segments due to current challenges [70] Question: How does the company view competition in the EV space? - Management acknowledged increased competition but emphasized their ability to differentiate and maintain market share through innovation and customer focus [64][86] Question: What are the expectations for the global economy's impact on business? - Management anticipates a significant deceleration in the global economy in the second half of 2023, affecting various segments [57][101]