Earnings Call Transcript - ITT Q1 2026

Operator, Operator

Welcome to ITT's 2026 First Quarter Conference Call. Today is Wednesday, May 6, 2026. Today's call is being recorded and will be available for replay beginning at 12:00 p.m. Eastern Time. It is now my pleasure to turn the call over to Carleen Salvage, Vice President, Investor Relations and FP&A. You may begin.

Carleen Salvage, Vice President, Investor Relations & FP&A

Thank you, Kathy, and good morning. Joining me in Stamford today are Luca Savi, ITT's Chief Executive Officer and President; and Emmanuel Caprais, Chief Financial Officer. Today's call will cover ITT's financial results for the 3-month period ended April 4, 2026, which we announced this morning. Please refer to Slide 2 of the presentation available on our website, where we note that today's comments will include forward-looking statements that are based on our current expectations. Actual results may differ materially due to several risks and uncertainties, including those described in our 2025 annual report on Form 10-K and other recent SEC filings. Except where otherwise noted, the first quarter results we present this morning will be compared to the first quarter of 2025 and include certain non-GAAP financial measures. The reconciliation of such measures to the most comparable GAAP figures are detailed in our press release and in the appendix of our presentation, both of which are available on our website. As previously communicated during our fourth quarter 2025 earnings call, going forward, ITT will include intangible amortization expenses related to acquisitions as a separate line item within the consolidated statement of operations and in its adjustments to earnings. In 2025, the impact of this reporting change on earnings per share was $0.13 in Q1 and $0.47 for the full year. All adjusted EPS figures presented going forward will be on this basis. A full reconciliation of the impact of the revision to adjusted operating income and margin, income from continuing operations and EPS for each quarter in 2025 and the full year can be found in the supplemental materials at the end of our presentation available on our website. With that, it is now my pleasure to turn the call over to Luca, who will begin on Slide 3.

Luca Savi, Chief Executive Officer & President

Thank you, Carleen, and good morning. Before I begin, I want to recognize our employees across ITT for delivering a very strong start to the year. In particular, our Middle East teams who delivered despite the ongoing conflict, the supply chain disruptions, and the challenges this has represented to their professional and personal lives. Thank you. In Q1, we demonstrated solid momentum across the portfolio, thanks to disciplined execution and the tangible benefits of our M&A strategy. We delivered outstanding orders growth above market, revenue expansion, and robust earnings exemplified by our 25% EPS growth in the quarter. We are truly energized. Here are some highlights. We grew orders 26% and 8% organically. We grew revenue 33% and 11% organically. We expanded margin by 130 basis points and we delivered 25% adjusted EPS growth. I'm also encouraged by SPX FLOW's strong start. In month one, we already produced net earnings and cash accretion and promising top-line growth. This is all included in our newly formed Flow Technologies segment that now combines industrial process and SPX FLOW. This was an outstanding quarter. Let's dive into the details. We grew revenue 33% and 11% organically with all businesses contributing. CCT was up 17% and grew industrial connector sales by 27% and Aerospace and Defense by nearly 20%, and we're already benefiting from the Boeing price negotiation closed last year. MT increased revenue 15% and 5% organically in an automotive market down, as friction outperformed global vehicle production by more than 1,400 basis points. And to top it off, Flow Technologies revenue was up 61% or 12% organically. The team delivered higher project sales, including from Sevan, which were up 44%. Short cycle also grew 10% due to market share gains in all product categories. On orders, ITT grew 26% and 8% organically in Q1, showing broad strength across our segments. CCT grew 10% organically on the back of strong aerospace demand and market share gains in industrial connectors. In Flow Technologies, we delivered 44% orders growth and 7% organically, driven by share gains in short cycle, including baseline pumps, aftermarket, and valves. Valves up 24% continues to benefit from a GLP-1 project that keeps expanding in scope. And friction continued to gain market share with significant platform awards, including in the high-performance segment. And last but not least, our book-to-bill was 1.09. We delivered equally strong margin expansion of 130 basis points with all businesses contributing. Flow Technologies delivered 23.7% operating margin, up 100 basis points, thanks to significant contributions from volume and, to a lesser extent, price. At 21.1%, ITT delivered 130 basis points of margin progression as productivity and volume growth more than offset price pressure. Finally, CCT expanded margin to 19.3% as volume growth and price both contributed. Moving to capital deployment. On March 2, we closed the SPX FLOW acquisition, one month ahead of schedule and with a leverage ratio comfortably below 3 at 2.7. The newly created Flow Technologies segment is nearly $3 billion in revenue and is a global flow leader with premier brands in pumps, valves, mixers and other process solutions. On the first day, the entire ITT leadership team actively participated in person to turn all meetings around the world with SPX FLOW employees. We laid out our vision and our expectations and answered questions from highly engaged employees. I was fortunate enough to be in Delavan, Wisconsin together with Rudy, our Waukesha/Cherry-Burrell leader. I was encouraged by what I saw in the plant, by the enthusiasm of the local team, by their deep knowledge of the business and their openness to do better and to do more. I also experienced this enthusiasm with Wendy, our mixing solutions leader, and our two other sites in Rochester, New York and Palmyra, Pennsylvania. Their teams have been working hard to improve material flows and overall equipment efficiency. Wendy, Rudy and I also shared future growth plans and, while still early in the year, I'm heartened by the orders and sales growth we delivered in the first quarter to achieve high single-digit revenue growth for 2026. When it comes to synergies, the Flow Technologies team has been hard at work identifying and implementing actions to secure the $80 million cost synergies. We have executed the first tranche related to corporate G&A cost reductions, and we are on track to deliver one-third of the total synergies in year one. We're also working hard to deliver commercial synergies. Last week, the Waukesha Cherry-Burrell business of SPX FLOW received its first order for an ITT Bornemann twin-screw pump—well done, Rudy and team and Rodolphe, I expect more. Finally, as part of our capital allocation strategy, we continue to cultivate and be active on smaller-sized M&A opportunities. In addition, in March, we deployed $100 million toward share repurchases. Moving on to guidance. Today, we initiate on the new basis our full year adjusted EPS guidance with a range of $7.70 to $8.00, up 9% at the midpoint. We're guiding to 37% revenue growth and 5% organic growth at the midpoint with a book to bill above 1, and we expect SPX FLOW to contribute low-teens net adjusted EPS accretion. This guidance is based on the profitable growth ITT has delivered over several years. Let us review our top-line growth trajectory since 2023 on Slide 4. Over the past three years, we have delivered outstanding top-line growth with orders and revenue up over 9% on average every year and we expect the strong growth trends to continue in 2026, both by market share gains in our legacy businesses and the contribution of SPX FLOW. In CCT, for example, as defense spending ramps up, we've been awarded large multi-year contracts like F-35 and RWS in the U.S. and ground vehicles, radar and precision-guided systems in Europe. We're well positioned to capture a significant portion of the incremental future spend out of our Witten facility in Germany. During my recent visit there, I sat down with our project managers who are collaborating with European contractors on the development of customized connectors for new device applications—well done Marco and June on fostering this level of customer intimacy. In MT, our KONI business grew more than 30% over the last three years to become a $200 million platform for growth and the shock absorber leader for high-speed trains in China. Moreover, our friction business continues to gain platform share and win market share as demonstrated by the Q1 frictional outperformance of over 1,400 basis points. At the end of last year, friction reached 32% of the global auto OE market and the share gain journey continues. Flow Technologies has been growing at a 15% revenue CAGR since 2023, in addition to the 12% organic growth and a 61% total revenue growth in Q1 this year. We continue to differentiate our flawless project execution as demonstrated by Sevan's growth of 44% with a book-to-bill over 1.2. Moving to backlog, we have nearly doubled it in the last three years, and it will continue to grow in 2026 as we strive towards a book-to-bill above 1 this year as well. With that, let me now turn the call over to Emmanuel to discuss Q1 results in detail on Slide 5.

Emmanuel Caprais, Chief Financial Officer

Thank you, and good morning. As Luca highlighted, we kicked off the year with a very strong quarter. In Q1, we delivered outstanding growth across the business in orders, revenue, margin and EPS. Our teams delivered $1.2 billion in revenue, up 33% in total and 11% organically. CCT grew 17% in total and roughly 20% in aerospace and industrial, and we're also realizing the benefit of the Boeing contract renewal. Flow Technologies grew 61% in total and 12% organically, driven by strong project shipments including Sevan, which is up 44%, and short cycle market share gains, especially in valves, which is up 19%. MT grew 5% organically, a significant achievement in a down market. Friction OE outperformed global automotive production by over 1,400 basis points with all regions above 1,000 basis points. SPX FLOW added 17 points of growth to ITT. On profitability, operating income grew 42% and margin expanded 130 basis points, primarily driven by strong operational performance in our legacy businesses and the SPX FLOW contribution. MT operating income grew 22% for a margin of 21.1% as the team drove net productivity of 220 basis points. Flow Technologies expanded margin 100 basis points to 23.7%, driven by price and volume leverage. CCT delivered 20% income growth to a margin of 19.3%, driven by aerospace volume growth and Boeing contract benefits. As previously stated, intangible amortization expense related to acquisitions is now excluded from adjusted operating income, including at the segment level. EPS of $1.98 on the new basis was up an outstanding 25% versus the prior year. You will note the immediate net accretion of the SPX FLOW acquisition. Lastly, free cash flow of $14 million was impacted by $71 million of one-time acquisition-related expenses. Excluding these impacts, free cash flow was up 10% year-over-year. Let's now turn to the Q1 EPS bridge on Slide 16. The 25% EPS growth was primarily driven by strong operational performance delivered by all businesses compounded by the month-one net contribution of SPX FLOW. Included in the SPX FLOW contribution is income from operations, partially offset by the higher interest expense and tax rate as well as the dilution from the December equity issuance and the equity given to Lone Star as part of the acquisition consideration. There were four additional working days in Q1 versus the prior year that will be reabsorbed in Q4. Finally, we continue to invest in strategic programs such as VIDAR, FLRAA, our Friction high-performance segment and the GeoPad to sustain growth for the long term. On to Slide 8 to discuss our 2026 outlook. With the SPX FLOW acquisition closed, we are now initiating our full year outlook. We expect 37% total revenue growth and 5% organic at the midpoint, driven by aerospace and defense demand, strength in both Flow projects and short cycle and continued friction OE outperformance following an outstanding Q1. Contribution from previous acquisitions continues to be ahead of expectations. We expect to deliver roughly 70 basis points of margin expansion to approximately 20% at the midpoint fueled by top-line growth, favorable price-cost and productivity gains. We expect SPX FLOW to deliver high single-digit revenue growth in 2026 and net adjusted EPS accretion in the low teens. Cost synergies are expected to be approximately $15 million in 2026. Regarding the Middle East, as a reminder, our overall exposure to the region is approximately 4% of total revenue and the conflict had minimal impact in our Q1 results. Finally, on cash, we expect to generate free cash flow of roughly $560 million at the midpoint resulting in a free cash flow margin between 10% and 11%. Now let's move to Slide 9 to finish with the EPS outlook detail. As you can see, the 9% EPS growth at the midpoint, much like Q1, will come from our differentiated execution comprised of above-market growth and productivity savings compounded by the SPX FLOW accretion. The SPX FLOW contribution is net of higher interest expense due to the $2.9 billion debt we contracted in March as well as a higher combined tax rate of 24.9%. It also includes a projected 90 million share count over the next three quarters. We will continue to invest part of the incremental profit generated to fund long-term growth initiatives. I'd now like to briefly discuss our Q2 outlook. EPS is expected to be up high single digits in Q2 compared to the prior year. We anticipate organic revenue growth in the mid-single digits, with Flow Technologies in the low double digits organically, CCT in the mid-single digits and MT in the low single digits. Operating margin should expand by around 50 basis points compared to the prior year and be approximately 20%. Interest expense is expected to increase meaningfully due to the acquisition of SPX FLOW. Let me now turn the call over to Luca to wrap up on Slide 10.

Luca Savi, Chief Executive Officer & President

Thanks, Emmanuel. A few points before Q&A. As you can see, we are energized for 2026. Our legacy business is firing on all cylinders. In Q1, we delivered double-digit organic growth, revenue growth and continued margin expansion. SPX FLOW provided a boost with strong orders growth, revenue growth and a fast start in synergy capture. This is our strategy in action: organic value creation through market share gains and relentless execution driving sustained margin expansion compounded by M&A. This is the commitment we made during our Capital Markets Day, and it remains a commitment today. We do what we say and Q1 proves it. This is ITT. Before opening the line for Q&A, there is one more thing that we'd like to share. Today we also announced a leadership transition. Emmanuel, our CFO for the last six years and my partner here at ITT for almost 14 years, is ready to take a break and will be leaving the company. Emmanuel, thank you for everything you've done. As I told you, in the last 14 years, I probably spent more time with you than with my wife. I do not know if that says more about our partnership or about my marriage. It has been a fantastic ride, full of challenges and achievements. I have so many memories from the very first day we met. You have always been there at my side in the performance and transformation journey, and we transformed this company indeed. In these 14 years, you made us better. I always knew I could count on you. We have been a real thought partner, a copilot to discuss with, to work with, to debate, agree and disagree with—a real partner. In these 14 years, you made me much, much better. I'm so grateful I was very fortunate to find you that day in Milan and work with you side-by-side for 14 years. Emmanuel will remain in an advisory role until the end of June, helping to ensure a seamless transition for us. Mike Saminelli, Vice President, Treasurer, Chief Tax Officer and Assistant Secretary, has been appointed to serve as interim CFO. Thanks, Mike. To the people connected to our call, thank you for joining us today. As always, I appreciate your time and continued interest in ITT. Kathy, please open the line for Q&A.

Operator, Operator

Our first question comes from the line of Joe Giordano with TD.

Joseph Giordano, Analyst (TD Securities)

Yes. Emmanuel, I know you don't like the spotlight, but you've been a great partner for all these years. I think we're all sad to see you go. Best of luck to you in the next chapter. Let's start, Luca. You never know everything about a deal, I guess, until you own it. So as SPX came into the portfolio, what was a pleasant surprise to you versus your initial views? And was there anything that made you realize we have a little more work to do, or that this was a bit different than what we thought?

Luca Savi, Chief Executive Officer & President

That's very true, Joe. I think that we don't forget that we cultivated SPX FLOW for three years. So we visited all the plants. We did deep dives on the due diligence. We really met many people. Therefore, we were able to find many things before the acquisition. One thing that surprised me even more positively is being able to walk the plant and talk to the people on the shop floor, for example, in Delavan, and to see the commitment and engagement of our workers in the Delavan plant, in the Rochester plant, in the Palmyra plant in Pennsylvania. So the engagement of the workforce on the shop floor is something that I was able to experience and definitely surprised me positively. I was also positively surprised by the growth potential that we have on the revenue synergies. We worked hard on those. It's going to take more time because those are revenue synergies, but definitely they are there and represent opportunities. Same on the cost side. I think that all of those are good and you start seeing it in the results: good orders growth, revenue growth accretive to EPS, a good pipeline visibility and moving fast on the synergies. From a cultural point of view, similar, but there are aspects that they do differently that both of us will have to adjust to.

Emmanuel Caprais, Chief Financial Officer

Thank you, Joe.

Joseph Giordano, Analyst (TD Securities)

Yes. And then maybe your defense business has been doing great for a while now. If we have a larger trend here over the next several months towards, say, an easing of global hostilities, does that create any sort of potential air pocket anywhere?

Emmanuel Caprais, Chief Financial Officer

No, we don't see that, Joe. I think that we have a portfolio that is broad in defense. We are on a lot of different applications, and there's a lot of defense modernization. There's a large defense modernization trend that is happening both in the U.S. and in Europe. We think that this is here to stay, and this is a long-term trend.

Operator, Operator

Your next question comes from the line of Julian Mitchell with Barclays.

Julian Mitchell, Analyst (Barclays)

And wish you all the best Emmanuel. If we think about the first question really around selling days dynamics — sorry for the fiddly question — but maybe help us understand how much of a contribution that was to sales or EPS in the first quarter and how we should think about the seasonality of EPS over the balance of the year as that selling days tailwind goes into reverse.

Emmanuel Caprais, Chief Financial Officer

Yes, Julian. So the contribution of the additional four selling days was around five points of growth in the quarter from a revenue standpoint and then a little less than $0.10 from an EPS standpoint in Q1. When we think about the cadence of EPS, I would say that the next few quarters are going to be around $1.90 to $1.95 EPS for Q2, Q3 and Q4.

Julian Mitchell, Analyst (Barclays)

That's really helpful. And then my follow-up would just be around if we're thinking about operating margins kind of moving around a lot year-on-year, I think you guided up 50 bps in Q2. They were up over 100 bps in Q1, and you've got a pretty wide margin guide range for the year as a whole. So maybe any sort of phasing of investment spend to be aware of in the year? And what are you assuming for the Flow acquired operating margin for the year as a whole, including those synergies you mentioned, please?

Emmanuel Caprais, Chief Financial Officer

Yes. From an operating margin standpoint, we expect continued progression during the year, and this is because of the productivity improvements that we're driving in all the businesses, as well as some of the price actions that we're taking and that will have a full impact starting in Q2. As you've come to expect of ITT, we drive margin progression year-over-year — that is really key to our success. From an SPX FLOW standpoint, we had a really strong margin in Q1. The reason for that is that we only had the month of March included, and March had five weeks which is unusually large, so a disproportionate impact in the quarter. We don't expect that margin to be the same in Q2, Q3 and Q4. However, we do expect that margin will continuously improve as we roll out our productivity plan as well as our growth initiatives.

Operator, Operator

Your next question comes from the line of Jeff Hammond with KeyBanc Capital Markets.

Jeffrey Hammond, Analyst (KeyBanc Capital Markets)

Best of luck to Emmanuel. We're sad to hear you're leaving as it sounds like Luca, you are, too. Just staying on SPX FLOW, can you dig in a little more on the order trends in that business just from a market standpoint? And it seems like shorter term you may be getting some early revenue synergies. But just the opportunities around leaning in on commercial excellence and starting to drive out growth — because I think one of the early concerns with the acquisition was the legacy growth rate. How do you accelerate that?

Luca Savi, Chief Executive Officer & President

Sure. When you look at orders growth, it was a good order growth of 5% overall for SPX FLOW in the quarter. When you look at the different businesses, Waukesha Cherry-Burrell, our ag pumps, their orders were up double digits. Nutrition & Health Solutions, orders were up 3%; mixers up 7%; and the pumps up 2%. So all the different businesses were up in terms of orders. All four businesses were up in revenue as well, with Nutrition & Health and Waukesha double-digit and mixers and pumps in the low single digits. Overall, revenue was up about 15% for the month included. We also expect the book-to-bill for the full year to be above 1 for SPX FLOW. This is consistent with what we saw during due diligence — the pipeline is there and we believe in the growth. This has a lot to do with the good work SPX FLOW employees have done. Topped with our approach of going after 100% — not the 80-20 — being more granular and more decentralized, I would expect performance to continue to improve.

Andrew Obin, Analyst

Okay. Great. And then just from a modeling standpoint, Emmanuel, you gave kind of the organic trends in the Q2 by segment, but how should we think about that within the 4% to 6%? And then just on the tax rate, is there an opportunity to bring that down over time? That was a little bit of a surprise that the tax rate is going up.

Emmanuel Caprais, Chief Financial Officer

Yes. For the full year, we expect both IP and CCT to lead the charge from an organic growth standpoint in the high single digits. Motion Technologies we expect in the low single digits for the full year because there's a decline in automotive production, though friction is outperforming very nicely as we saw in Q1. From a tax rate standpoint, today we stand at almost 25% at 24.9%. This is the direct impact of SPX FLOW. Mike and the team will work on tax opportunities to bring that tax rate down, but I think there will be limited impact in 2026 and more to come in the years after.

Operator, Operator

Your next question comes from the line of Nathan Jones with Stifel.

Nathan Jones, Analyst (Stifel)

I'll add my best wishes to Emmanuel. First question here on CCT margins. It seems over the last few years, you guys have done the work on improving the value proposition to customers there, improving productivity, on-time delivery. So my question is about value-based pricing in CCT and where you are in that process outside of the commercial OEM stuff? How much do you think that could contribute to margins over the next two or three years?

Luca Savi, Chief Executive Officer & President

Thanks, Nathan. That's fair. Price has been a good tailwind for CCT in the last couple of years for the reasons you said. The price negotiation with Boeing that we closed last year is a natural proof of that. Having said that, I think there is more to do on pricing on the CCT front, and this is what the team is working on. I would say the largest opportunity is probably in connectors. The connector offering is providing great service to our customers, and there's more to be done specifically in that part of CCT.

Nathan Jones, Analyst (Stifel)

I guess a follow-up. I'm interested in revenue synergies out of this kind of deal. I know they take longer to generate, so I'm not asking what they contribute to 2026, but could you provide a little more color on the things you're working on where you see opportunities to generate revenue synergies and if you have any target over time of what that could add to overall growth?

Luca Savi, Chief Executive Officer & President

Sure. Let's be specific. When I was in Delavan together with Rudy on the shop floor, we saw that Waukesha didn't have the Bornemann twin-screw pumps. We were spending money at Waukesha to develop a new twin-screw pump. We did the assessment — Bornemann pumps are highly regarded in the market — and therefore Waukesha will sell Bornemann twin-screw pumps. That was a small order we had, but it's a start. Not only will they start selling but then we will also localize production of twin-screw pumps in our plant network. That's a specific activity that should deliver synergies. Latin America on the mixing front: our regional leader is working hard with SPX FLOW leaders, and as we localize decision-making we speed up decisions and action and get more intimate with customers. The Middle East is another area we're working on, but that is more planning at this stage. There are also opportunities because we now have a base in Xidu, Shanghai where we did not have a plant before in legacy Flow Technologies, and a plant in Poland which gives us a low-cost manufacturing base in Europe. So we're working on all those fronts.

Operator, Operator

Your next question comes from the line of Vladimir Bystricky with Citigroup.

Vladimir Bystricky, Analyst (Citigroup)

Good morning, guys. And I echo the sentiment. Congratulations to Emmanuel. We'll miss working with you tremendously. I guess my first question — when I look at the organic growth outlook for the year, the plus 4% to 6% seems very consistent with what you were thinking coming into the year. Can you talk about whether there's been any moving pieces underneath that — businesses or regions trending better or worse versus three months ago? And specifically, are you baking in any incremental headwinds in the Middle East associated with the conflict there?

Luca Savi, Chief Executive Officer & President

Sure. No major change from what we were expecting, Vlad. The Middle East is something to watch, but to give you perspective, the Middle East is about 4% of total revenue and the impact in Q2 is probably less than 1% of ITT revenue, roughly between $0.5 million and $0.7 million in sales impact. There's very strong performance in short cycle when you look at spare parts and baseline — that growth is volume growth, not nominal pricing. Industrial connectors sales have market share gains and are providing a tailwind. Asia Pacific, particularly China, has been a good tailwind driven by medical and HVOR. Europe has been working hard on defense due to the ramp-up there, and North America shows strength in distribution.

Vladimir Bystricky, Analyst (Citigroup)

That's really helpful, Luca. Following up on industrial connectors — when you talk about market share gains there, can you give any more color on what specific end markets or verticals you're seeing share gains in and any notable regional differences?

Luca Savi, Chief Executive Officer & President

There is very good performance in Asia Pacific, where the team has worked really hard on the medical side and medical has been growing very strongly, and then also on HVOR. So Asia Pacific and China have been a definite tailwind. In Europe, orders are being driven by defense as that market ramps. In North America, distribution is broader, so it's harder to point to a single market, but overall, medical and HVOR in Asia and defense in Europe are notable drivers.

Operator, Operator

Your next question comes from the line of Brad Hewitt with Wolfe Research.

Bradley Hewitt, Analyst (Wolfe Research)

So you mentioned that your friction business outgrew auto builds by 1,400 basis points during the quarter. Curious if you expect that outgrowth versus build to compress through the rest of the year? Or could there perhaps be upside this year — is the typical algorithm of 400 to 500 basis points of outgrowth?

Luca Savi, Chief Executive Officer & President

I would say that was an exceptional performance and it highlights the resilience of the team and the business. However, it's only one quarter, so for the full year we would stick to our usual forecast of outperformance between 500 and 700 basis points. What I really like about this outperformance is that it was broad-based across regions, including China, Europe and North America. We also won 39 electrified platforms in the quarter, which will feed future market share gains. While vehicle production will be down this year to roughly 91 million vehicles, production of hybrids and EVs will grow double digits and that's where we are particularly strong.

Bradley Hewitt, Analyst (Wolfe Research)

Okay. Great. And then as we think about the total company level, can you walk through your assumptions for the year in terms of the net price-cost equation as well as some of the moving pieces related to tariffs and material inflation?

Luca Savi, Chief Executive Officer & President

On price and cost, you have the usual dynamic: a very good price-cost equation in IP and CCT because we have more pricing power, less so in Motion Technologies where we feel price pressure. Overall for the full year at ITT, price-cost should be positive. On tariffs, the situation is fluid and may change in the coming weeks. We are actively pursuing opportunities to recover tariffs that we already pay, but that process will be long. As we demonstrated in 2025, we were able to offset tariff impacts with commercial and productivity actions, and we expect a similar scenario in 2026.

Operator, Operator

Your next question comes from the line of Matt Summerville with D.A. Davidson.

Matt Summerville, Analyst (D.A. Davidson)

Echo similar sentiment on Emmanuel. Just two quick ones for me. Can you talk about the core industrial process funnel as you look ahead relative to maybe what you were seeing 90 days ago or a year ago — whatever makes sense to provide the most informed comparison as to how that's evolving? And then I have a follow-up.

Luca Savi, Chief Executive Officer & President

Sure, Matt. The funnel is very healthy. It's elevated and is up year-over-year and also up sequentially. The region where the funnel is up the most is North America, which is interesting because this is where we had our largest orders growth. That tells us about the replenishment speed of opportunities in North America. The funnel is down when you look at Europe and the Middle East for obvious reasons because many commercial conversations and investments, such as with certain large customers, are paused. We expect those to start again quickly if the situation normalizes.

Matt Summerville, Analyst (D.A. Davidson)

And then I was wondering if you could sort of cadence out the Flow accretion you expect for the year. If we were at roughly $0.04 in Q1, obviously you're assuming something more conservative on the look ahead over the next three quarters. Maybe help me understand the logic behind that — is it conservatism, or how should we think about that cadence?

Emmanuel Caprais, Chief Financial Officer

Yes. In Q1 you had an outsized contribution from SPX FLOW because March is disproportionate compared to the rest of the quarter. Also in Q1 we had less interest expense and a smaller share count. As you ramp into Q2, Q3 and Q4 you'll see interest increase roughly by $30 million a quarter and share count normalize toward 90 million shares. As a result, SPX FLOW continues to deliver strong performance but the net contribution is impacted by higher interest, normalized share count and the fact we only included one month in Q1. We expect continued progression of growth and margins at SPX FLOW as we roll out productivity and prepare the ground for further productivity and cost synergies in 2027.

Operator, Operator

Your last question comes from the line of Scott Davis with Melius Research.

Unknown Analyst (Jake on for Scott), Analyst (Melius Research)

It's Jake on for Scott. Congrats on getting the SPX deal across the goal line and congrats to Emmanuel as well. We appreciate all your help over the years and hopefully you'll be on the beach in a few months. On the Middle East I know you touched on it, but I'd imagine when you start turning on some of the production that has been shut in, you'll have a lot of valves and pumps and other products that probably won't work as they should, to say nothing of infrastructure that has been destroyed. Is there a way to think about what the upside might be on the other side of this conflict?

Luca Savi, Chief Executive Officer & President

Yes, what you said is absolutely true. We expect that when investment starts again and conversations resume, there should be strong service demand. The service business is very good and our team is well positioned to perform. The expansion work we did in Saudi Arabia will be helpful at that time. I also want to highlight the performance of our Habonim valves in Israel: despite the war, that business has been able to grow orders and revenue. We did experience margin pressure due to higher container and transportation costs and operational disruption, but it was a great performance from the Habonim team in the Middle East.

Unknown Analyst (Jake on for Scott), Analyst (Melius Research)

Okay. That's good color. A different topic: I was surprised to hear you mention small bolt-on deals on the call given everything you have on your plate with SPX. It seemed deliberate — is that an indication that maybe there are some deals in your pipeline you feel are actionable? Do you have the organizational capacity to take on some more from here?

Luca Savi, Chief Executive Officer & President

Yes, Jake. We do have capacity. The SPX FLOW integration primarily involves our Flow business units and those teams are operating well. There are businesses, like Habonim, performing very well with strong fundamentals — they have the capacity to add small bolt-ons. We also kept our leverage ratio at 2.7 to maintain flexibility. We have the financial capacity and management bandwidth to pursue small, strategic bolt-ons. Nothing large at this time, but small targeted acquisitions are feasible.

Operator, Operator

Thank you. This ends today's teleconference. Please disconnect your lines at this time, and have a wonderful day.