Seaport Upgrades ITT From Accumulate To Buy

Seaport Global’s Ryan Cassil believes “oil price stability bodes well for a long-term recovery in short-cycle oil & gas spending.”

Cassil upgraded the rating on ITT Inc (NYSE: ITT) from Accumulate to Buy, while raising the price target from $37 to $41.

Positive Moves Expected

The analyst also expects ITT to recover quickly from the 37 percent “decremental” segment margins witnessed in 1Q16.

Cassil expects the decremental margins to improve sequentially through 2016, with cost actions offsetting mix headwinds, while volumes also start improving.

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“Our thesis for strong double-digit growth in Motion Technology remains intact as recent wins with the 'big three' US automotive manufacturers should backfill 2015’s double-digit organic growth from China,” the analyst said.

Cassil believes that the transition to a holding company would prove to be net positive for shareholders, since it would allow ITT to shield assets across its business from litigation related to legacy asbestos claims.

In addition, if there are any divestitures, they would be easier to execute.

The 2017 EPS estimate has been raised from $2.59 to $2.62.