Shares of ITT Corporation ( ITT ) surged 6.37% during the trading session, after its fourth-quarter earnings release before the opening bell, to close at $41.93 on Feb, 13. The company reported fourth-quarter 2014 adjusted earnings of 59 cents, which beat the Zacks Consensus Estimate of 57 cents. The company's earnings recorded a solid 20% increase over the year-ago tally of 49 cents mainly on excellent operational performance and reduction in effective tax rate. However, foreign exchange headwinds continued to hurt the company's performance.
For full year 2014, adjusted EPS stood at $2.47 for a 22.2% increase over 2013 tally.
ITT's diversified portfolio, coupled with strategic investments for growth and advancement in lean transformation of the business culture, drove the earnings growth. As per management, the beat came on the back of four strategic moves, namely, buoyant market expansion, impressive performance of the aerospace segment, intensified customer differentiation measures and extension of lean management to other operational activities beyond manufacturing.
ITT reported fourth-quarter revenues of $660 million, reflecting a 2.2% increase from the year-ago quarter, and comfortably surpassed the Zacks Consensus Estimate of $653 million. Organic revenues grew 6% year over year.
For full year 2014, revenues totaled $2,654.6 million, recording a 6.3% rise over the 2013 value. Organic revenues for the full year increased 7% year over year.
Positive factors aiding the top line for fourth quarter of 2014 included a rise in the number of global oil and gas pumps, and chemical and mining pumps in North America. Negative factors constituted difficulties in aftermarket automotive brake pads, and reduction in defense and non-strategic connectors.
Q4 Segment Details
The Industrial Process segment reported revenues of $340.7million, rising 15% year over year. An increase in oil and gas pump projects in North America drove the revenue growth in this segment.
Motion Technologies' segment revenues declined 13% to $156.6 million compared with the fourth quarter of 2013. Major aftermarket restocking in 2013 had more than offset the revenue growth from market share rise in China, thus rendering prior-year comparisons difficult.
Revenues of the Interconnect Solutions fell 10% to $90.7 million due to weak performance of defense and non-strategic connectors. Growth in North America and the Middle-East gas connectors failed to combat the decline in revenues.
Revenues of Control Technologies recorded a 5% increase to $73.2 million, mainly driven by solid performance of aerospace and defense platforms. Industrial growth also supplemented the revenues in this segment.
Income and Expenses
ITT reported operating income of $80.5 million compared with $62.7 million in the prior-year quarter. The improvement was largely attributable to strong operational performance and strategic investments on part of the company. Operating margins increased 250 basis points to 12.2% in the fourth quarter of 2014.
The company's selling, administrative and general expenditure stood at $138.1 million, representing a 5.3% decline from the year-ago quarter. Research and development expenses rose 9.9% to $20.2 million.
Balance Sheet and Cash Flow
At the end of fourth-quarter 2014, the company had cash and cash equivalents of $584.0 million compared with $507.3 million at year-end 2013.
For the twelve months ended Dec 31, 2014, net cash from operating activities totaled $244.7 million compared with $ 226.6 million in 2013, while capital expenditure was $118.8 million compared with $122.9 million in 2013.
The company decided to increase its quarterly dividend by 7.5% to 11.83 cents per share. The dividend is payable on Apr 6, 2015, to shareholders on record as of Mar 13.
Based on better-than-expected results in the fourth quarter, the company provided its earnings guidance for 2015. Adjusted earnings per share from continuing operations are presently expected in the range of $2.55-$2.65 per share, marking 5% year-over-year increase at mid-point and 13% year-over-year after eliminating the effect of foreign exchange. GAAP earnings per share are predicted in the range of $1.80-$2.01.
The company anticipates total revenue to decline in the range of 1-3%, while organic revenues are expected to grow by 1-3%.
ITT currently has a Zacks Rank #3 (Hold). Better-ranked stocks include Swire Pacific Limited ( SWRAY ), VSE Corp. ( VSEC ) and Federal Signal Corp. ( FSS ). While both Swire Pacific Limited and VSE Corp. sport a Zacks Rank #1 (Strong Buy), Federal Signal Corp. carries a Zacks Rank #2 (Buy).
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