Goldman Sachs upgraded ITT Industries (ITT ) to outperform from in-line.
Analyst Jack Kelly says his upgrade is based on several factors, including valuation, recent price performance, and the earnings outlook. Given the company's business mix, earnings consistency, and strong cash flow, he thinks the stock's p-e should be in line with the group average, suggesting 20% upside potential.
Kelly thinks possible reasons for the stock underperformance includes less leverage to an upturn in the economy compared with other industrials, and concern over near-term profitability in ITT's electronics components group. Kelly thinks the current valuation more than discounts these concerns. He sees $3.85 2003 earnings per share, and $4.25 for 2004.