ITT Inc Q4 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Joseph Ritchie - Goldman Sachs - Analyst : Congratulations on another strong year. I guess maybe where I'll start is just the guidance for 2025. I know you guys historically have tended to guide fairly conservatively. But maybe, Emmanuel, if you can just kind of step me through how are we thinking about the cadence for this year from an earnings standpoint? And are there any things that we need to be aware of, particularly like in the first quarter, just that could potentially impact Q1 and maybe gets better as the year progresses?

Question: Joseph Ritchie - Goldman Sachs - Analyst : Super helpful and detailed. And then maybe the longer-term question, and I'm sure we'll get a lot more at the Investor Day in May. Look, you guys have done a great job on the margin expansion piece, getting to your targets a couple of years in advance. The commentary around the price renegotiations on CCT is interesting. I'd be curious if you can maybe talk a little bit more about what's going on there and ultimately, the opportunity potentially within that segment.

Question: Michael Halloran - Baird - Analyst : Could you just talk about what you're seeing from an order pattern on the IP side of things, both from the short cycle side as well as the project activity? Obviously, strong backlog coming into the year, how is that backlog feeling? I know you commented on robust short cycle there. What are you seeing kind of sequential dynamics and anything worth noting in some of the end markets?

Question: Michael Halloran - Baird - Analyst : And I suppose, how are you expecting that to roll through to this year from a trend perspective? I mean is that front log of opportunities still really strong. And what are the customers are saying? And so maybe just kind of roll through the momentum and how you think that plays out?

Question: Jeffrey Hammond - KeyBanc Capital Markets - Analyst : I just wanted to understand the temporary intangible amortization. Because last quarter, you called out $0.21 going away, maybe that is, but you had a footnote with $0.17 intangible. So just trying to understand the delta because, I guess, I look at your (inaudible) this year plus that $0.21 is kind of your starting point, and that would imply just kind of limited earnings growth in the guide?

Question: Jeffrey Hammond - KeyBanc Capital Markets - Analyst : Okay. Maybe give us a sense of core -- these acquisition -- these moving pieces as it makes it messy, but core incremental margins in the fourth quarter for IP CCT, it looks like underlying margins were really good, but again, masked by the deal. And then just on '25, I think the midpoint is 90 basis points of margin expansion. Just I don't know if order of magnitude where you see the segment's lining up. Again, I know there's noise segment by segment, given the deals.

Question: Scott Davis - Melius Research - Analyst : Congrats on a great year. Slide 18, you guys just referenced the M&A muscle, and I think you said it a couple of times in the prepared remarks, but what does that really mean functionally? Is that diligence and integration? Is it more that you beefed up the diligence side? Kind of walk us through the changes you've made at least and what that really -- what that means to you guys?

Question: Damian Karas - UBS - Analyst : So I wanted to ask you about your guidance for Motion Technologies kind of up low single digits for the segment. Could you maybe spell out a little bit more what you're baking in, in terms of global auto production? How much you're expecting Friction to outperform as well as KONE and the Rails business?

Question: Damian Karas - UBS - Analyst : That's very helpful. And sticking on the Motion Technologies business, could you possibly give us an update on how Friction is doing in the high-performance market? Any trends that you're seeing there? As well as are there any possible strategic changes this year? I know in the past, you've talked about exploring, maybe opening up into some of the aftermarkets in Asia, China specifically, or maybe moving a little bit into the light vehicle trucking side of the Friction market. We appreciate any perspective on that.

Question: Nathan Jones - Stifel Financial Corp. - Analyst : I guess I'll start on the tariff side of this because you guys have some fairly material operations in Mexico. So obviously, there aren't any tariffs yet, but there may be. So a couple of questions around those. Firstly, I would imagine the Motion Technologies business, the business in Mexico primarily sells to OEMs in Mexico. So any tariffs on those brake pads would actually be on the OEM rather than on you. Is that the correct way to think about the -- at least the brake pad business? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 2:30PM, ITT.N - Q4 2024 ITT Inc Earnings Call

Question: Nathan Jones - Stifel Financial Corp. - Analyst : Well, let me ask it this way. You guys obviously had some issues with auto OEMs passing through inflation during COVID and are still recovering that now. But you have commented that some of those contracts have been changed so that inflation passes through on a bit more of a real-time basis to the OEMs. Would that be the case if you saw a tariff? Or would you need to pursue pricing? And then I guess, saying as part of my follow-up question, I'll ask you to talk about the potential impact of tariffs on the CCT business as well.

Question: Joseph Giordano - TD Cowen - Analyst : Just going back to the IP side. When you think about your guidance mid-single digits, it feels fairly conservative just given the level of orders that you've won. I'm just curious how -- when you build that out, is it -- are you kind of layering in potential elongation of project time lines due to like geopolitical type stuff? Just curious how you came up with that? It just feels like maybe there's upside to that number, where the orders are?

Question: Joseph Giordano - TD Cowen - Analyst : Okay. Yes, that's all fair. I'm still probably going to take the over on your growth there, but I appreciate the comments. Luca, just given what's going on politically now, does it change -- you've done so well with some of these international deals. Does it change your strategy on acquiring businesses that are based outside the US, just given what's going on with tariffs and all those -- all the rhetoric there?

Question: Bradley Hewitt - Wolfe Research, LLC - Analyst : So maybe sticking with IP, just curious within the mid-single-digit organic growth outlook there for 2025 and how does that break down between projects and short cycle? And then from a margin perspective, it looks like you're implying about 100 basis points of margin expansion ex Svaneh°j. So just curious if you could kind of break down the drivers of that 100 basis points kind of on the left IP business there?

Question: Bradley Hewitt - Wolfe Research, LLC - Analyst : Okay. That's helpful. Appreciate that. And then maybe as we think about CCT margins it sounds like margins for 2025 ex kSARIA should be around 20.5%. So just trying to think about as the kSARIA amortization winds down a year do you still think the 22% margin target in 2026 could be in play for CCT? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 2:30PM, ITT.N - Q4 2024 ITT Inc Earnings Call

Question: Vladimir Bystricky - Citi - Analyst : Thanks for squeezing me in here. So just following up and digging in on some of the questions around backlog and visibility. I guess just going into the year with $1.6 billion of backlog, can you give any color on how you're thinking about how much of that converts actually within the year versus the portion that might be longer dated tied to some of those longer projects?

Question: Vladimir Bystricky - Citi - Analyst : That was helpful color. I guess just one last follow-up for me. Just on the CCT mid-single-digit organic growth, I know you mentioned in the slides Boeing expected ramp beginning in 2Q. I guess, can you talk about how material that Boeing ramp is to your outlook and how you're thinking about or how we should think about any potential risks to that growth if there are operational challenges there linger more than what's baked into your outlook?