ITT Inc.: Q2 Beat, Margin Inflection, and the Price of Growth

Q2 Beat and the Most Important Development: Orders Top $1B, Guidance Raised#

ITT reported a quarter that changed the framing for the company: revenue outperformed Street estimates by roughly $25 million and management raised its 2025 EPS view after orders for the quarter topped $1.0 billion, an operational milestone that underpins forward revenue visibility. That single datapoint—orders > $1B—was the most consequential development in the quarter because it links near-term revenue conversion, backlog depth and the company’s ability to sustain recently improved margins and EPS momentum.

The market reacted not to a lone revenue beat but to the combination of above-consensus sales, clear margin expansion and explicit management commentary that recent bolt-on acquisitions are accretive to both revenue and operating profits. Those claims are quantifiable: ITT’s FY2024 results show improving margins and faster earnings growth versus revenue, even as the company increased financial leverage to fund acquisitions that expanded product content and backlog.

Q2 2025 — What Happened, In Numbers and Quality#

According to ITT’s Q2 2025 presentation and press release, total revenue for the quarter (reported in the company deck) came in ahead of consensus and organic growth, while orders exceeded $1.0B, supporting a raised full-year EPS outlook ITT Investors - Q2 2025 Presentation and ITT Investors - News Release: ITT Reports 2025 Second Quarter Earnings.

Beyond the topline beat, the quarter displayed three elements that matter for earnings quality: sustained organic revenue, margin expansion driven by pricing and productivity, and cash conversion. Management reported organic revenue growth (mid-single digits in total company results, with segment variation), and adjusted operating margins expanded across the three segments, supporting an EPS raise. Cash flow quality is mixed: while operating cash flow remained positive and free cash flow stayed healthy, sizable acquisition cash outflows materially changed the balance-sheet posture in FY2024 (discussed below).

Segment Performance: Where Growth and Margin Expansion Came From#

ITT’s three reporting segments displayed differentiated contributions to the beat and the broader growth story. The Q2 segment data and commentary are summarized in the company presentation and reinforced by the earnings release ITT Investors - Q2 2025 Presentation.

Motion Technologies returned to positive organic growth and showed margin resilience. Management reported Q2 Motion revenue of $365.7 million with ~3% organic growth, and the segment’s adjusted operating margin expanded to 20.2%, up materially year-over-year on pricing, aftermarket strength and productivity. Industrial Process was the largest absolute contributor in dollars and displayed both order and margin momentum: reported Q2 revenue of $355.9 million, organic growth of ~5.5%, and segment margin roughly 21.5% as pump project execution and the Svanehøj integration boosted revenue and backlog. Connect & Control Technologies delivered the fastest headline growth: Q2 revenue of $251.9 million, up ~31.3% on a reported basis and mid-single-digit organic growth, with margin expansion driven by aerospace demand and the kSARIA acquisition.

Taken together, the segments show a credible execution pattern: bolt-on M&A adding revenue and backlog while pricing and productivity lift margins. The orders beat and backlog expansion are the clearest evidence that the top-line gains can persist into coming quarters, so long as project execution and end-market demand remain intact.

FY2024 Financial Trends — Recalculating the Story From the Reported Statements#

The annual financial statements in ITT’s FY2024 filings give a fuller picture of the company’s underlying economics. Below are independently calculated YoY changes and margin inflection metrics using the company’s FY figures (all figures are from company financials and investor filings cited below): revenue, gross profit, operating income, EBITDA and net income.

Using those numbers, the key calculated year-over-year changes for FY2024 versus FY2023 are: revenue +10.67%, gross profit +12.69%, operating income +28.00%, EBITDA +28.56%, and net income +26.26%. Those calculations confirm that earnings and operating leverage improved faster than top-line growth—an important signal that margin expansion, not financial engineering, is the primary driver of EPS gains. The source financials are in ITT’s FY filings and investor presentation ITT financials (FY 2024).

Margin Inflection: Magnitude and Drivers#

Margins improved materially in FY2024. The moves were not trivial: gross margin increased from 33.73% to 34.35% (+62 bps), operating margin from 16.09% to 18.62% (+253 bps), EBITDA margin from 19.47% to 22.63% (+316 bps), and net margin from 12.50% to 14.28% (+178 bps). These improvements are consistent with management’s narrative that pricing, better mix, and acquisition synergies lifted profitability across segments. The magnitude—especially the >250 bps lift in operating margin—supports the claim that ITT is realizing structural operational gains as opposed to a one-off accounting benefit.

Balance Sheet, Cash Flow and the Price of Accelerated Growth#

ITT’s capital allocation in FY2024 shows the trade-offs that accompany rapid, acquisition-fueled growth. The balance-sheet and cash-flow items below are taken from the FY2024 statements.

The single largest balance-sheet movement is the jump in total debt and the swing from net cash to net debt. Net debt moved from - $204.0M in 2023 to + $317.2M in 2024, a change of $521.2M, largely driven by acquisitions cash spend of $689.5M in FY2024. That investment bought revenue, backlog and product content (notably kSARIA and Svanehøj), but it also shifted leverage metrics and introduced interest/repayment considerations that investors must monitor. Operating cash flow continued to grow (+4.63% YoY), and free cash flow remained positive at $438.2M, showing the business still generates cash support for ongoing dividends and buybacks, albeit with less balance-sheet optionality than a year ago ITT cash flow statements.

Leverage and Coverage Calculations#

Using FY2024 figures, simple leverage calculations show the following: FY2024 net debt / FY2024 EBITDA = $317.2M / $821.5M = 0.39x. This stat contrasts with the company’s TTM net-debt-to-EBITDA metric of ~0.86x reported in the rolling ratios table—an inconsistency driven by different rolling-period denominators and timing of cash flows. Where management (and the market) tends to focus is TTM rolling metrics for covenant and peer comparisons, but the FY calculation demonstrates that, on a last-year basis, ITT’s acquired leverage remains modest relative to many industrial peers. The swing from net cash to net debt is the obvious trade-off for faster top-line and backlog expansion.

Capital Allocation: Dividends, Buybacks and M&A Discipline#

ITT returned capital while investing in growth. Dividends paid in FY2024 totaled $104.7M and share repurchases were $104.5M in the year’s financing activities; at the same time the company spent $689.5M on acquisitions. The dividend payout ratio based on TTM EPS (dividend $1.34 / EPS TTM $6.37) is roughly 21.04%, consistent with the company’s policy of a modest, sustainable payout that leaves room for buybacks and M&A. The trade-off is explicit: management prioritized bolt-on acquisitions that expand content and backlog while preserving a modest distribution to shareholders ITT dividends history.

The critical capital-allocation question is return on invested capital from acquisitions versus the cost of the acquired funding. ITT’s reported ROIC (TTM) of 13.49% is a useful anchor for that conversation: if acquisitions can sustain or exceed that ROIC, they are value-accretive. Early integration commentary from management and the immediate revenue/backlog lift are positive signals, but the ultimate test is multi-year ROIC convergence, which will be visible only after completed integration and normalized margins.

Valuation and Market Context (Recomputed Multiples)#

Market pricing as of the latest quote shows ITT trading at $170.26 with a market capitalization of $13.28B. Using the FY2024 EPS of $6.36, the spot P/E is 26.77x (170.26 / 6.36). The company also reports forward P/E projections in analyst consensus and company valuation breakouts; consensus forward P/E for 2025 is ~24.96x, declining in outer years as earnings are projected to grow valuation data.

ITT’s EV/EBITDA (TTM) sits at ~17.35x per the company summary. Those multiples are not cheap in absolute terms versus deep-value industrials, but they reflect a growth-inflected mix: accelerating organic growth, margin expansion and accretive M&A. The market appears to be paying a premium for demonstrated execution and higher-quality recurring revenue mix while embedding expectations for continued margin capture.

Two Calculated Discrepancies and How We Prioritize Them#

Two data points require explicit reconciliation. First, the TTM current ratio (reported) is 1.45x, while the FY2024 current assets / current liabilities calculation is 1.40x. The small difference is timing-driven—TTM uses rolling quarterly data that can smooth intra-year cash cycles—so we prioritize the TTM figure for liquidity trend analysis but rely on the FY snapshot for balance-sheet change analysis. Second, net-debt-to-EBITDA differs depending on the denominator (FY EBITDA vs TTM EBITDA): 0.39x (FY2024) vs 0.86x (TTM). Again, the TTM metric is the market-standard comparator and thus the primary one for peer and covenant contexts, but the FY calculation illustrates the leverage level after the large 2024 acquisitions.

Key Takeaways#

ITT’s recent results create a clearer, data-backed case for reclassifying the company as a growth-inflected industrial. For FY2024 the company delivered $3.63B revenue (+10.67% YoY), EBITDA $821.5M (+28.56% YoY) and net income $518.3M (+26.26% YoY), while Q2 orders topping $1.0B provide forward visibility. Margin expansion was meaningful: operating margin expanded by 253 bps year-over-year and EBITDA margin by 316 bps, driven by pricing, mix and acquisition synergies.

The cost of that growth is higher leverage: net debt swung from - $204.0M to + $317.2M in FY2024 after $689.5M of acquisition cash spend. Cash generation remains solid—operating cash flow and free cash flow were positive and increased YoY—so the company retained flexibility for dividends and buybacks, albeit with less cushion than before the acquisitions.

Management’s playbook—tuck-in M&A, pricing discipline and productivity—has shown early execution success. The critical next tests will be multi-quarter organic growth durability, the conversion of backlog into margin-accretive revenue, and demonstrated ROIC on acquisitions.

What This Means For Investors#

Investors should view ITT as an industrial business that is executing a growth playbook with measurable near-term effects. The Q2 orders milestone materially increases revenue visibility and reduces near-term cyclicality for a company whose mix now has a larger share of project and aftermarket revenue that is higher-margin. The margin expansion observed in FY2024 was broad-based across segments and therefore more likely to be sustainable than a single-segment outlier.

At the same time, the capex of growth—primarily acquisitions—means investors must monitor three near-term indicators: rolling TTM leverage metrics (net debt / EBITDA), free cash flow conversion, and the pace at which backlog converts into revenue at projected margins. The company’s ROIC and forward estimates will be the ultimate arbiter of whether those acquisitions were value-creating. The positive sign is that operating cash flow and free cash flow remained positive and rose YoY even with the acquisition cadence, indicating the business can fund growth while returning capital.

Final Synthesis and Forward Signal#

ITT’s FY2024 and Q2 2025 results present a coherent narrative: revenue growth, outsized operating leverage and accretive M&A combined to drive faster EPS growth and a higher-quality margin profile. The large increase in orders in Q2—>$1.0B—is the development that ties the transformation together: it provides a forward-looking underpin to the revenue and margin story.

That transformation is real but not costless. The company’s balance-sheet has moved from net cash to net debt as management deliberately paid for bolt-on capability and backlog. The trade-off is defensible if acquisitions sustain ROIC above cost of capital and if organic growth remains mid-single digits. The coming quarters will be decisive for proving sustainable organic growth, showing continued margin capture and converting backlog into high-quality cash earnings.

For investors seeking exposure to engineered-product growth backed by operational improvement, ITT’s combination of accelerating profitability and disciplined M&A is a constructive, data-backed story—but one that requires monitoring of leverage, cash conversion and multi-quarter execution to validate the longer-term thesis.

Sources#

Financials and investor materials: ITT Investors — Q2 2025 Presentation and News Release, company filings and quarterly results pages cited inline ITT Investors - Q2 2025 Presentation, ITT Investors - News Release: ITT Reports 2025 Second Quarter Earnings. Additional market context and coverage: Nasdaq and Investing.com as indicated in-text.