ITT profit beats Street; 2011 revenue view raised

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Diversified manufacturer ITT Corp reported a higher-than-expected quarterly profit as sales rose in its commercial businesses.

The company, which is planning to spin off its defense and water segments into separate companies, raised its revenue outlook for the year but forecast profit for the current period below Wall Street estimates. Its shares edged down 0.5 percent in late morning trading.

ITT plans the split to take advantage of recovering commercial and industrial markets as global defense spending comes under pressure. After the spin-offs, ITT Corp will focus on aerospace, transportation, energy and industrial engineering, Reuters reports.

Denise Ramos, current ITT chief financial officer who will be chief executive of ITT Corp after the separation, said the current economic uncertainty was a reason to complete, rather than delay, the spin-offs.
“Doing this transaction is not linked at all to what’s happening economically,” Ramos told Reuters. “It’s even more important to do the transaction and the spin-off so that each one of these companies can deal with their own economic environments that they will be operating in.”

Net income at ITT fell to $168 million, or 90 cents a share, in the second quarter, from $238 million, or $1.28 a share, a year earlier.

Adjusted for special items, including costs tied to the spinoff plan, profit was $1.18 a share. On that basis, analysts expected $1.16 a share, according to Thomson Reuters I/B/E/S.

Revenue rose 10 percent to $3 billion, compared with $2.83 billion that analysts expected.

In defense, the company’s largest segment, quarterly revenue was flat at $1.5 billion and operating income fell 26 percent, as lower-margin service businesses accounted for a higher portion of sales.

ITT projected full-year defense sales of $5.6 billion to $5.7 billion, up from an April forecast of $5.4 billion to $5.6 billion, citing contract wins in services, and said it may take additional restructuring moves in the segment to bring down costs.

The fluid technology unit, which provides water treatment products and management, saw both revenue and operating income rise 26 percent in the second quarter, helped by demand tied to oil and gas activity. Water segment revenue is seen rising 17 percent this year, up from a forecast of 15 percent in April.

The motion and flow control segment, which serves aerospace and rail markets, had a 14 percent quarterly revenue gain as operating income rose 36 percent.

For the full year, ITT stood by a prior forecast for earnings of $4.70 to $4.82 a share, adjusted for special items. For the third quarter, it forecast profit of $1.10 to $1.14 a share.

Analysts expect profit of $1.22 a share for the third quarter and $4.79 for the year.

ITT said full-year revenue is now expected to be $11.5 billion, up from its prior view of $11.3 billion.

Shares of ITT eased 29 cents to $54.21 on the New York Stock Exchange. The stock has risen about 4 percent this year.