Results From 2Q Reinforce Bear Case For ITT

Analysts at JP Morgan maintain their "neutral" rating on ITT Corp ITT, while reducing their estimates for the company. The target price for ITT has been reduced from $54 to $51. According to JP Morgan, “The 2Q from ITT serves to reinforce the cautious thesis. First, Defense revenue was officially cut along with the backlog target, while margin outperformance here only further levers the portfolio to a business moving past peak. Comm’l was better, but there are headwinds here in Europe, adding to austerity-related risks in Defense. With pension a headwind, flattish ’11 EPS is a potential outcome.” “Bottom line, best case is slow growth in Defense, which depresses leverage at comm’l; worst case, Defense turns down big and austerity measures drive low growth/declines in key Comm’l businesses. Even in a tougher macro environment, given that the dynamics revolve around gov’t spending, we no longer view this as a relatively secure earnings stream. This is the box in which management finds itself and we think a bold portfolio move (perhaps shrinking) may be the only way out,” the analysts mention. JP Morgan has lowered its EPS estimates for 2010 and 2011 from $4.20 to $4.15 and from $4.30 to $4.15, respectively. More Analyst Ratings here