ITT Q2 Deep Dive: Backlog Momentum, Margin Expansion, and Acquisitions Fuel Growth

Engineered components manufacturer for critical industries ITT Inc. (NYSE: ITT) reported Q2 CY2025 results topping the market’s revenue expectations, with sales up 7.3% year on year to $972.4 million. Its non-GAAP profit of $1.64 per share was 1.8% above analysts’ consensus estimates.

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StockStory’s Take

ITT’s second quarter results were met with a positive market reaction, reflecting strong execution in both organic growth and recent acquisitions. Management credited broad-based demand across industrial, aerospace, and defense end markets, as well as robust order intake—especially in the Industrial Process and Connect & Control segments. CEO Luca Savi highlighted successful integration of acquired businesses like Svanehøj and kSARIA, and noted that “all our businesses delivered a strong order intake.” The company’s focus on operational improvements and strategic pricing actions, particularly in the face of competitive pricing and foreign exchange pressures, underpinned margin stability and earnings growth.

Looking ahead, ITT’s raised full-year profit outlook is anchored by continued strength in its project backlog, contributions from recent acquisitions, and steady demand in defense and transportation. Management anticipates margin improvement through ongoing productivity initiatives and disciplined pricing, despite acknowledging mix headwinds and higher acquisition-related costs. CFO Emmanuel Caprais emphasized, “We expect continued growth in the project business in IP, firm demand in aerospace and defense, and outperformance in friction OE and rail to continue in the second half.” Investments in automation and new product launches are also expected to support future profitability.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to strength in project execution, share gains in key markets, and disciplined cost management, while highlighting meaningful contributions from recent acquisitions.

• Order growth across segments: Orders rose sharply in all divisions, with Industrial Process up 22% and strong momentum in defense and commercial aerospace. Recent acquisitions Svanehøj and kSARIA contributed notably, with Svanehøj’s year-to-date orders exceeding its full-year 2024 revenue.
• Project execution and share gains: The company won significant projects in oil and gas through its Bornemann brand, citing superior technology and service as drivers, even amid aggressive competitor pricing. Management described these wins as evidence of increasing market share.
• Margin expansion despite headwinds: Operating margin improved, supported by higher volumes and pricing, which offset negative impacts from foreign exchange and temporary acquisition amortization. The legacy Industrial Process segment grew margin by 100 basis points due to productivity and price actions.
• Acquisition integration progressing: Both Svanehøj and kSARIA delivered margin expansion, sales growth, and strong cash generation, outperforming initial expectations. Management expects future margin improvement from these acquisitions as integration deepens.
• Strategic pricing and automation: Connect & Control Technologies benefited from successful strategic pricing negotiations, especially in aerospace, and began implementing automation projects that improved productivity at key manufacturing sites. These initiatives contributed to significant margin gains within the segment.

Drivers of Future Performance

ITT’s full-year outlook is driven by a robust backlog, ongoing acquisition integration, and sustained demand in end markets, with productivity and pricing actions supporting margin expansion.

• Backlog and project visibility: Management pointed to a nearly $2 billion backlog, up 34% year-over-year, as providing strong revenue visibility into the second half and into 2026. Projects in oil and gas, as well as green energy applications, are expected to support growth.
• Acquisition contributions: The integration of Svanehøj and kSARIA is forecast to deliver annual margin improvement, with management targeting roughly 100 basis points per year. These businesses are expected to continue outperforming in both orders and cash generation.
• Pricing, mix, and cost headwinds: The company aims to offset higher M&A-related costs and an unfavorable shift in business mix—toward longer-cycle projects—through productivity initiatives and further pricing action, especially in Connect & Control. Tariff exposure for 2025 is expected to be mitigated through these measures, resulting in no material earnings impact.

Catalysts in Upcoming Quarters

In the months ahead, our analyst team will monitor (1) the pace of backlog conversion into revenue, particularly for large project wins in Industrial Process, (2) further margin improvements and cost efficiencies from automation and productivity programs, and (3) the ongoing integration and financial impact of Svanehøj and kSARIA. Progress on new product commercialization and resilience to competitive pricing in key end markets will also be important signposts.

ITT currently trades at $169.99, up from $159.54 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free).

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