ITT Wins Air Force Contract - Analyst Blog

ITT Corporation (ITT) has bagged a contract from the U.S. Air National Guard for testing an all-weather targeting pod for the F-16 fighter aircraft.

The solution will provide capability to all F-16 models to magnify ground targets. The pod's aircraft interface is the same as that of the existing ones, which permits efficient installation and transfer between aircraft. This is a low-cost solution and capable of providing older aircraft with advanced targeting capabilities without requiring structural changes.

ITT plays an important role in vital markets, including water and fluids management, global defense and security, and motion and flow control. It possesses industry leading brands in the Fluid Technology and Motion & Flow Control businesses. The company is well diversified and serves attractive end-markets with a broad geographic footprint.

We are particularly bullish about these two segments: a) water equipment (primarily pumps), which should benefit from the replacement and upgrade of ageing networks in developed markets and the build-out of infrastructure in emerging markets and b) ITT's Defense business, with the bulk of sales derived from electronic and network-centric warfare.

The Defense Electronics & Services business segment is subject to a number of risks, including defense budgets and government contract requirements and regulations, which could have an adverse impact on the results of operations.

The Fluid Technology and Motion & Flow Control business segments are subject to certain industry risks, which could have an adverse impact on the results of its operations.

Adverse macroeconomic and business conditions, particularly in the local economies of the countries or regions where the company operates, may negatively affect its revenues, profitability and operations.

The company's Defense Electronics and Services segment develops, manufactures and supports high-technology electronic systems and components for worldwide defense and commercial markets and provides communications systems and engineering and applied research. Principal manufacturing facilities are located in the United Kingdom and United States of America.

ITT Corporation, with 2009 revenues of $10.9 billion, is a global multi-industry leader in high-technology engineering and manufacturing. It is engaged in the design, manufacture and sale of a wide-range of engineered products and services.

We currently have a Neutral recommendation on ITT Corporation.