ITT Inc

ITT reported second-quarter organic sales growth of 13% year over year, driven by strength in its flow technologies and connect and control segments. Management raised its full-year guidance.

Why it matters: Stripping the impact from ITT's acquisitions reveals strong underlying organic growth. ITT's wide-moat flow technologies segment, which grew 20.7% organically year over year, was the quarter’s largest contributor. We don't view this level of growth as maintainable, however. Organic orders declined 3% because the comparison included large prior-year pump awards. The wide-moat connect and control technologies segment grew sales 17.3% organically while its order book grew 59%, pointing to continued growth.

The bottom line: We maintain our $175 fair value estimate for wide-moat ITT. We consider the shares to be slightly overvalued. ITT's sales are lumpy and derived from a number of cyclical end markets. However, we see multiyear strength driven by unprecedented US construction activity on the heels of the energy transition, reshoring, and now artificial intelligence-focused data center spending.

Between the lines: ITT repurchased approximately $521 million of stock at an average price of $137 in 2025. It then issued around 8 million shares at $167 in December to help finance the acquisition of SPX Flow. We like that sequence but reiterate that SPX Flow was acquired at a rich valuation and will add significant integration risk, given its large size relative to ITT. CFO Emmanuel Caprais left in May for personal reasons. Longtime treasurer and chief tax officer Michael Savinelli has taken over as interim CFO. We expect a smooth transition and a continuation of ITT's capital allocation strategy.

Our $175 fair value estimate equates to around 22 times our estimate of 2026 adjusted earnings. ITT's value is underpinned by its wide economic moat rating, through which we believe the firm can outearn its cost of capital over the next 20 years.

ITT’s diverse products are exposed to a number of secular demand trends, including the industrialization of developing nations, rising content in electric vehicles, and middle-class disposable income growth driving demand for commercial air travel. ITT’s connect and control technologies segment also has significant white-space opportunities, given the trend toward electrification.

ITT's markets are highly fragmented, and the firm has been active on the mergers and acquisitions front in recent years, adding companies to its industrial pump and aircraft component divisions. In aggregate, we believe ITT can achieve mid-single-digit top-line growth over our explicit forecast. By continuing to expand margins through automation, improved supply chain sourcing, and consolidation of its physical footprint, we model earnings per share compounding at a high-single-digit pace.

We assign ITT a Wide Morningstar Economic Moat Rating carved through intangible assets and switching costs. Importantly, ITT’s returns on invested capital did not fall below its cost of capital during the last two industrial slowdowns in 2016 and 2020.

We assign ITT's motion technologies segment a narrow moat rating. It produces midteens returns on capital, in line with narrow-moat peers Allison Transmission, Cummins, and Parker Hannifin. MT houses various vehicle and locomotive components such as shock absorbers, brake pads, pressure regulators, diaphragm seals, and air cylinders. The company estimates that it holds just over 30% of the global automotive brake pad market. ITT’s content per vehicle is rising with the advent of electric vehicles, and we see substantial intangible assets and switching costs inherent in its vehicle components.

MT’s components are specified in the models of cars, trucks, buses, and trains. Automotive platforms that it secures generally last five to seven years and involve multiyear contracts that evidence switching costs. The consequences of a vehicle failure can be high, resulting in potential accidents and recalls. Moreover, redesigning a vehicle’s model using a new supplier can require lengthy regulatory approvals. These factors bolster switching costs and place emphasis on MT’s brand strength, patents, and technical superiority.

However, we believe MT’s aftermarket business has considerably more competition. Many of MT’s components need to be replaced at regular intervals given the wear and tear of ground vehicles and trains, but the cost of using a different supplier is low, and there tends to be a wider selection of alternative brands for a given vehicle model. Nevertheless, regulatory hurdles are still quite high, and the segment derives around one-quarter of revenue from aftermarket sales.

ITT’s second segment, flow technologies, garners a wide moat rating based on intangible assets and switching costs. FT has been able to generate midteens returns on capital in recent years, in line with wide-moat peers Spirax, Idex, and Emerson Electric. Although we expect the segment to outearn its cost of capital over the business cycle, it has struggled to create economic value during downturns given its exposure to cyclical end markets. We believe the 2026 acquisition of SPX Flow helps reduce FT's cyclicality as SPX generates over half of its revenue from the nutrition, health, and personal care industrial process markets, which tend to be relatively stable.

FT sells various pumps and valves that are installed within chemical, petroleum, pharmaceutical, mining, paper, food and beverage, and power generation plants. Its components represent a small percentage of the customer’s operating budget, have multiyear useful lives, and their failure can be catastrophic. As a result, we suspect customers value the reputations and time-tested performance data of FT's flagship brands such as Goulds Pumps and Rheinhütte Pumpen.

Goulds Pumps was founded in 1848, a time when industrial and residential pumps and pipes were made out of wood. Seabury Gould invented the first all-metal pump, and his firm went on to develop many of the pumps used in advanced iterations of steam trains, windmills, oil refineries, and sewage systems. Many of its pumps, such as the Goulds 3196, are still manufactured and sold today, illustrating the longevity of Goulds’ product lines. Rheinhütte Pumpen, founded in 1857, possesses a similarly rich heritage in different niche markets and pioneered corrosion-resistant metal and silicon castings.

Once installed, FT's pumps and valves generate a long tail of high-margin aftermarket revenue (just under half of segment sales) as they are periodically serviced and replaced like-for-like. ITT claims other primary factors that influence the customer’s purchase decision are product breadth and customer support, both of which ITT excels in meeting through its global distribution network and installed base formed over many decades.

We assign ITT’s final segment, connect and control technologies, a wide moat rating also based on intangible assets and switching costs. CCT sells customized, highly engineered connectors, actuators, and switches within military and commercial aircraft, industrial plants, and EVs. The segment produces returns averaging in the low teens, but we think its return profile is resilient given the inherent characteristics of the aerospace and defense component market, from which CCT derives around half of its sales. Moreover, we expect the segment’s returns to improve, as it has undergone the fewest efficiency initiatives among ITT’s three segments. CCT’s peers include wide-moat Amphenol and TransDigm as well as narrow-moat Heico and TE Connectivity and no-moat Sensata Technologies.

CCT’s aerospace components are used in aircraft avionics, cabin systems, navigation and control equipment, and engines. Compared to components within ground vehicles, aerospace components are designed to withstand more extreme conditions and generate a longer tail of aftermarket revenue as they are specified into aircraft models that are manufactured and in operation for many decades. The failure of an aircraft can be far more costly, giving rise to stricter regulations and fewer suppliers. As such, we think CCT’s intangible assets and switching costs are stronger than those of ITT’s motion technologies segment.

Aftermarket parts and services represent around one-fourth of aerospace and defense sales. Some of the segment’s brands (for example, Aerospace Controls) have worked closely with aircraft OEMs for over a century, improving upon the weight, fuel efficiency, and reliability of bespoke components. CCT’s nonaerospace business follows the same formula as ITT’s other segments, competing on intangible assets and generating recurring aftermarket revenue enabled by switching costs.

ITT’s content per vehicle is on the rise as EVs constitute a greater proportion of new-vehicle sales.

The firm’s prudent debt management gives it room to make value-accretive acquisitions.

Acquisitions have remained focused and within ITT’s core competencies, and we expect the same going forward.

ITT’s business is cyclical, as it mainly sells into end markets prone to economic downturns.

The industrial pumps segment generates lower returns than many peers.

The company’s conglomerate structure is outdated and drags the performance of its stronger businesses down.