An investor looking at the 2011 ITT Corporation (ITT)
share price chart might wonder what has happened to the company. The shares appeared to have lost two-thirds of their value in a single day. What happened is the old ITT became a new ITT on Oct. 31, 2011 when the board of directors split up the company, entering a new era as multiple firms and adjusting the share price to reflect the change.
The October split-up of ITT resulted in the spinoff of the company's defense business into a new company called ITT Exelis (XLS)
and a water management business as the new Xylem (XYL)
ITT retained the components business, providing products for the aerospace, transportation and energy sectors. With the spinoff, ITT declared a one-for-two reverse stock split. Post-split, a shareholder of ITT ended up with one ITT share and two each XLS and XLY shares for each two pre-split ITT shares. The market cap of Xylem equals the other two companies combined.
The third quarter for ITT closed on Sept. 30 and the earnings report was issued before the official date of the spinoffs. There was not an earnings breakdown in the report to provide an idea of the relative profitability of the three new companies.
The new ITT is a company with a projected $2 billion in annual revenues and a current market cap of $1.85 billion. Management believes focusing on the remaining specialized product lines will allow ITT to post significant growth in the coming years.
For the remaining quarter of 2011, ITT is forecast to earn 36 cents per share. The Wall Street consensus estimate for 2012 earnings is $1.75 per share, with individual firm estimates ranging from $1.50 to $2.11.
After the spinoff, the analysts at Keybanc Capital Markets initiated coverage on ITT with a buy rating and a target price 25 percent above the current share value.
The company next reports on Feb. 2.
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