ITT

ITT Inc. Q2 2026 10-Q Summary

Business Context and Reporting Period

This is a Quarterly Report on Form 10-Q for ITT Inc., a diversified manufacturer of critical components for transportation, industrial, energy, and health markets. The reporting period covers the three and six months ended July 4, 2026. The quarter included four additional working days compared to the prior year. A defining event for the period was the completion of the acquisition of SPX FLOW, Inc. on March 2, 2026, for a preliminary purchase price of $4.31 billion. SPX FLOW results are reported within the Flow Technologies (FT) segment. The company operates through three segments: Flow Technologies, Motion Technologies (MT), and Connect & Control Technologies (CCT).

Key Financial Metrics

Note: Total Debt includes $858.4M in short-term borrowings and $2,869.8M in non-current long-term debt.

Material Changes vs. Prior Period

• Revenue Growth: Revenue increased 51.5% in Q2 and 42.4% for the six months, driven primarily by the SPX FLOW acquisition ($359.6M contribution in Q2) and organic growth of 12.7% (Q2) and 11.8% (6M). Organic growth was led by aerospace/defense in CCT and pump projects in FT.
• Profitability Compression: While Operating Income increased slightly (3.0%) in Q2, the Operating Margin declined 580 basis points to 12.2%. This was primarily due to $51.0M in incremental intangible amortization and acquisition-related costs associated with SPX FLOW.
• Net Income Decline: GAAP Net Income attributable to ITT decreased 29.8% in Q2 and 29.0% for the six months. This decline is attributed to higher interest expense ($49.7M vs $12.6M in Q2), increased intangible amortization, and a higher effective tax rate.
• Balance Sheet Expansion: Total assets grew from $6.3B to $11.0B, and Total Debt increased significantly to $3.7B to finance the SPX FLOW acquisition. Cash and equivalents decreased from $1.74B to $590.8M due to acquisition funding.
• Segment Performance:
  • Flow Technologies: Revenue surged 122.7% (Q2) due to the acquisition, though operating margin dropped to 7.9% due to integration costs and amortization.
  • Motion Technologies: Revenue grew 5.6% (Q2) with operating margin expanding to 21.3%.
  • Connect & Control: Revenue grew 17.4% (Q2) with operating margin expanding to 20.6%.

Guidance, Outlook, and Risks

• Outlook: Management expects demand to remain generally resilient for the remainder of 2026. The company anticipates continued integration of SPX FLOW, with synergies expected to be realized over time. Backlog stands at $2.67 billion, with 60-65% expected to be recognized in the remainder of 2026.
• Non-GAAP Adjusted Metrics: Management highlights Adjusted Operating Income of $295.2M (Q2) and Adjusted EPS of $2.08 (Q2), representing an 18% increase year-over-year, excluding acquisition impacts and amortization.
• Risks and Contingencies:
  • Geopolitical Instability: Ongoing conflict in the Middle East (specifically involving Iran) poses risks to energy prices, supply chains, and global trade.
  • Integration Risk: Risks associated with integrating SPX FLOW operations and realizing projected synergies within expected timeframes.
  • Tax Rate Volatility: The effective tax rate increased significantly due to undistributed foreign earnings and transaction costs; future rates may fluctuate based on geographic earnings mix and tax law changes (e.g., OECD Pillar Two).
  • Debt Covenants: The company has significant new debt obligations (including a $2.875B Delayed Draw Term Loan) and must maintain leverage ratios below 3.50x (with temporary step-ups for acquisitions).

Investor Verification Checklist

• Acquisition Integration: Verify the timeline and progress of SPX FLOW integration and the realization of cost synergies to offset the high amortization burden.
• Debt Servicing: Confirm the company's ability to service the increased debt load ($3.7B total) and maintain compliance with leverage covenants (3.50x EBITDA) given the current interest rate environment.
• Organic Growth Sustainability: Assess whether the 12.7% organic revenue growth is sustainable across all segments, particularly in the cyclical automotive (MT) and aerospace (CCT) markets.
• Tax Rate Normalization: Monitor future effective tax rates to determine if the 36-37% rate is a one-time anomaly due to transaction costs or a structural shift.
• Cash Flow Conversion: Review operating cash flow trends to ensure they remain sufficient to cover interest payments and dividends despite the heavy capital deployment for the acquisition.