ITT Inc. (ITT)

ITT Inc. Q1 2025 Financial Analysis

Report Date: May 7, 2025
Period Covered: Quarterly period ended March 31, 2025

Executive Summary

• Revenue was $9.13 billion, flat vs. Q1 2024 (0.3% growth)
• Gross profit of $3.16 billion, margin of 34.6%, up 150 bps
• Operating income of $1.51 billion, margin of 16.5%, in line with prior year
• Net income attributable to ITT: $1.084 billion (EPS $1.33), down 2.7%
• Total debt grew to $7.37 billion (+11.6% QoQ), reflecting higher commercial paper and recent term-loan draw

Profit and Loss Analysis

Revenue Drivers:

• Motion Technology: down 11.8% to $3.461 billion (divestiture/wolverine, FX headwinds, offset by organic rail growth)
• Industrial Process: stable at $3.333 billion; svanehøj acquisition and aftermarket strength offset pump project lapping
• Connect & Control Technology: up 26.8% to $2.347 billion (ksaria acquisition, pricing gains, defense demand)

Margin Improvement:

• Pricing actions and operational productivity drove a 150 bps expansion in gross margin to 34.6%.
• Material and labor cost increases partially offset by savings and pass-through pricing.

Expense Dynamics:

• G&A up $138 million YoY due to restructuring, personnel costs and FX.
• R&D down $31 million from Q1 2024 (project timing, divestiture impact).
• SG&A increased on investment behind growth segments, offset by divestiture of low-margin lines.

Interest & Tax:

• Net interest expense rose on higher debt balances ($500 million vs. $208 million interest expense).
• Effective tax rate 24.4%, up from 22.7%, driven by mix and Pillar 2 minimum tax.

Balance Sheet & Cash Flow

• Total Assets: $48.3 billion
• Total Liabilities: $20.5 billion; Total debt $7.37 billion
• Equity: $27.8 billion

Liquidity:

• Cash & equivalents: $4.4 billion
• Undrawn revolver capacity and €3.3 billion commercial paper program support working capital.

Cash Flow:

• Operating cash flow: $1.134 billion (+96% YoY)
• CapEx: $368 million
• Free cash after investing and financing: $662 million inbound

Pros and Cons

Pros:

• Strong gross-margin expansion from pricing/productivity
• Diversified end markets with stable aftermarket
• Cash generation improved; net debt/EBITDA ~1.5x

Cons:

• Rising debt levels increase interest sensitivity
• FX volatility and tariffs remain a headwind
• Tax rate pressure from global BEPS initiatives

Summary

ITT’s Q1 2025 results highlight disciplined margin management and solid cash conversion, offsetting modest revenue headwinds in automotive and timing impacts in R&D. The recent $7.5 billion term-loan and continued commercial paper usage have fueled debt growth. Looking ahead, management must navigate input-cost inflation, currency swings and incremental tariff risk while leveraging long-cycle aftermarket and engineering backlog to drive next-quarter expansion.

Segment Revenue & Margins (Q1 2025):

• Motion Technology: $3,461 M (37.9% of total revenue), 19.5% operating margin
• Industrial Process: $3,333 M (36.5%), 19.1% margin
• Connect & Control Technology: $2,347 M (25.7%), 15.3% margin

ITT is on a sustainable margin trajectory, driven by pricing discipline and operational improvements. Cash flow generation supports deleveraging, though recent acquisitions and CP borrowings have increased leverage. Tariff uncertainty and raw-material inflation are key risks. Future growth hinges on successful integration of technology acquisitions (ksaria, svanehøj), strong aftermarket momentum and the ability to pass through cost pressures. Continued focus on diversified end markets, R&D efficiency and balanced capital deployment will be critical for long-term value creation.