ITT Inc. (ITT) Cash Flow Statement

The wide quarterly swings in OCF/NI, from 0.51 to 2.25, suggest that reported net income is not a reliable proxy for cash generation in any single quarter. The Q1 2026 dip to 0.51 coincides with a $113.2M working capital outflow, likely reflecting seasonal or acquisition-related inventory builds, while Q2 2026's 2.25 multiple benefits from a working capital release. Investors should focus on the trailing twelve-month conversion ratio, which appears more stable, to assess true earnings quality.

The sequential FCF recovery from $13.6M to $162.0M is striking, with the FCF margin expanding from 1.1% to 11.0%. This suggests that the working capital drag in Q1 2026 was temporary, and the underlying business is generating robust cash. However, the $3.5B acquisition outflow in Q1 2026 (likely for Svanehøj) distorts the picture; excluding that, FCF would have been higher. The raised guidance implies this trajectory may persist, but investors should monitor integration costs.

With CapEx/Revenue consistently below 4% and often near 2%, ITT's capital requirements are modest relative to its revenue base. This suggests that maintenance capex is manageable and that growth investments are primarily directed toward acquisitions rather than organic capacity expansion. The low capital intensity is a key driver of the company's ability to generate strong FCF and maintain a fortress balance sheet.

The large negative working capital changes in Q1 2026 and Q1 2024 (both over -$100M) suggest seasonal or acquisition-related inventory builds, while positive changes in Q4 2024 and Q4 2025 indicate strong collections. This volatility is not unusual for a company with project-based revenue in the Industrial Process segment. The overall trend appears manageable, but investors should expect continued quarter-to-quarter noise.

The $3.5B acquisition outflow in Q1 2026 (likely for Svanehøj) dwarfs the $100M buyback in the same quarter, signaling a strategic pivot toward high-growth cryogenic pump technology. Dividends have increased consistently from $26M to $34.5M per quarter, reflecting a commitment to returning cash. However, buybacks have been sporadic, with a $400.8M repurchase in Q2 2025 followed by minimal activity, suggesting management is opportunistic rather than systematic.

The cumulative OCF/NI ratio of approximately 1.25 over the ten-quarter period suggests that ITT's earnings are backed by strong cash generation, with non-cash charges like D&A and SBC providing a buffer. This divergence is a positive signal for investors, as it implies that reported profits are not being inflated by aggressive accruals. The gap may also reflect working capital efficiencies and the timing of large project payments.