Thursday, January 13, 2011

ITT (NYSE:ITT) Spin Considered a Positive by FBR

The announcement that ITT Corp. (NYSE:ITT) is going to spin off into three different companies was a positive surprise, according to FBR Capital.

They said, "In a positive but somewhat surprising announcement, ITT outlined plans to separate into three publicly held companies through a tax-free spin. The three companies would separate broadly along the lines of existing segments to form pure-play Defense (roughly 50% of 2011 revenues), Water (36%), and Industrial (14%) companies. The key driver behind this decision, in our view, is the company’s unusually depressed valuation; over the past several quarters, ITT’s shares have traded at a sharp -21% P/E discount to Multi-Industry peers primarily due to concerns in Defense. While the breakup is certainly a positive from a value-unlocking perspective, the timing is somewhat surprising given management’s recently articulated strategy to start a new growth platform/“fourth-leg.”"

ITT was trading at $60.33, down $1.17, or 1.90 percent, as of 12:41 PM EST. FBR has a price target of $61 on them, and maintains a "Market Perform" rating on the company.

No comments: