WSJ Says ITT Corporation (ITT) Is Undervalued

ITT Corporation (NYSE: ITT), a defense and industrial conglomerate that produces defense equipments and industrial products like water pumps, has tripled its stock price since 1999.

However, various factors, including its CEO Steven Loranger's selling almost a fifth of his shares in the company, and a pre 3rd quarter quiet period which aroused shareholder speculation, feeds into concerns about ITT's defense business. Though the defense business generated almost 58% of its last year revenue, it is a general truism that aerospace and defense stocks have slumped this year.

In spite of this, several points seem to convince the Wall Street Journal that the ITT stock is undervalued. One of them is the kind of defense equipment that ITT manufactures. This includes jammers that disable the improvised explosive devices of Iraq and Afghanistan, which cause the highest number of American war-casualties; it is highly likely that such a device will remain a priority, budget-deficit or no budget-deficit. Other growth areas for ITT include Cyber-warfare capabilities and upgrading the air-traffic-control system.

Another factor that weighs into the WSJ equation is that almost three-quarters of ITT's industrial revenue, or 33% of group sales, comes from a sector with high growth potential: fluid technology. According to the EPA (Environmental Protection Agency), U.S. drinking-water infrastructure will require as much as $335 billion of investment over the next two decades.