ITT Inc.: A High-Conviction Play in Industrial Innovation and Margin Expansion

In a year marked by volatile macroeconomic conditions and supply chain uncertainties, ITT Inc. (NYSE: ITT) has emerged as a standout performer in the industrial sector. The company's Q2 2025 results underscore its strategic mastery of organic growth, disciplined M&A, and margin resilience—factors that position it as a high-conviction play for investors seeking long-term value creation. With a clear roadmap to 2030, ITT is not just navigating the industrial landscape; it is reshaping it.

Organic Growth: The Bedrock of Sustainable Value

ITT's Q2 revenue of $972.4 million—a 7.3% year-on-year increase—was driven by robust organic growth of 4.3%. This performance reflects the company's ability to capitalize on secular trends in sectors like aerospace, defense, and industrial automation. The Industrial Process segment, for instance, saw a 22% organic order growth, fueled by a 62% surge in pump projects. Such demand highlights ITT's critical role in infrastructure and energy markets, where its high-margin solutions remain inelastic to cyclical downturns.

The company's focus on innovation is evident in its Connect & Control Technologies segment, which delivered 9% organic order growth, driven by defense and aerospace contracts. These projects, often characterized by long lead times and recurring revenue streams, ensure a stable backlog of approximately $2 billion—a buffer against near-term volatility.

Disciplined M&A: Amplifying Scale Without Compromise

ITT's acquisition strategy has been a masterclass in strategic alignment. The recent acquisitions of Svanehøj and kSARIA, for example, are already outperforming expectations, contributing to the bottom line despite temporary amortization impacts. These deals expanded ITT's capabilities in precision motion control and digital connectivity, areas where the company is now a market leader.

Importantly, ITT's M&A approach is selective and margin-conscious. The 270-basis-point margin expansion in the Connect & Control Technologies segment (excluding acquisition dilution) demonstrates the company's ability to integrate new assets without sacrificing profitability. This contrasts sharply with peers who often prioritize revenue scale over margin preservation.

Margin Resilience: A Competitive Moat

ITT's Q2 operating margin of 18.4%—up 30 basis points year-over-year—reflects its operational discipline. The Industrial Process segment's 21.8% margin (a 100-basis-point improvement) and Motion Technologies' 20.2% margin (up 140 basis points) highlight the company's ability to leverage its high-margin industrial solutions.

Free cash flow growth further cements this resilience. ITT generated $214 million in free cash flow for the first half of 2025, a 30% increase year-over-year. With a target of $450–$500 million in total free cash flow for 2025 (12–13% of revenue), the company has ample flexibility to fund its $500 million share repurchase program and debt reduction efforts. This financial fortitude is rare in a sector where capital expenditures often erode cash flow.

2030 Vision: A Blueprint for Compound Growth

ITT's long-term targets are ambitious yet achievable. The company aims to deliver greater than 5% compound annual growth in its base business, with adjusted operating margins climbing to 23% by 2030. When factoring in M&A contributions, revenue CAGR is projected at 10%, and adjusted EPS is expected to exceed $12. These metrics are underpinned by ITT's focus on high-growth, high-margin markets, including electrification, digital connectivity, and advanced materials.

The recent share repurchases—reducing the share count by 3% in 2025—further enhance EPS growth, with adjusted EPS already up 10% year-to-date (or 13% excluding the impact of the Wolverine divestiture). This dual focus on earnings power and capital efficiency creates a compounding engine that few industrial peers can match.

Investment Thesis: A High-Conviction Buy

For investors, ITT represents a rare confluence of defensive and offensive attributes. Its high-margin industrial segments offer resilience in downturns, while its innovation-driven growth and disciplined M&A strategy unlock upside in expansionary cycles. The company's 2030 targets, combined with its current free cash flow yield (projected at 12–13%) and a forward P/E ratio that remains attractive relative to its growth profile, make it a compelling buy.

Final Call to Action:
Given ITT's strategic alignment with long-term industrial trends, its track record of margin expansion, and its proactive capital allocation, it is a high-conviction addition to a diversified industrial portfolio. Investors with a 3–5 year horizon should consider initiating or increasing positions in ITT, particularly as its 2030 vision begins to materialize in the next phase of earnings growth.