Ingersoll-Rand Worth Buying on Healthy End Markets, Buyouts
We believe that Ingersoll-Rand plc IR is a solid choice for investors seeking exposure in the industrial machinery space.
The stock, with roughly $25-billion market capitalization, has been upgraded to a Zacks Rank #1 (Strong Buy) on Aug 30. Moreover, the stock’s investment appeal is accentuated by a favorable VGM Score of B.
The company delivered better-than-expected results in three out of the last four quarters, with an average positive earnings surprise of 5.29%.
Why the Upgrade?
We are providing a snapshot of how Ingersoll-Rand fared in second-quarter 2018. The company’s earnings of $1.85 per share surpassed the Zacks Consensus Estimate by 7.56%. Net sales went up 11% year over year on the back of sales growth of 11% in the Climate segment and 13% in the Industrial segment.
In the quarters ahead, Ingersoll-Rand stands to gain from growing popularity of the company’s products and services offered under its two segments — Climate Solutions and Industrial Technologies. Further, businesses in various end markets — including commercial HVAC (heating, ventilation, and air conditioning), residential HVAC, transport, industrial and other — seem to be healthy. Continued investment to boost technological expertise, develop innovative products and business expansion in the Chinese market remains a boon for the company.
Another interesting aspect about Ingersoll-Rand is its acquisitive nature. In this regard, the buyout of ICS Cool Energy in January 2018 is worth mentioning. Since acquired, ICS Cool Energy has been strengthening the company’s commercial HVAC business. Further, the company strongly believes in rewarding shareholders handsomely. Cash of $222 million was used for paying dividends in the first half of 2018 (with 18% hike in quarterly dividend rate announced in June) while shares worth $500 million were repurchased.
For 2018, Ingersoll-Rand has increased its projection for adjusted earnings per share of approximately $5.50 from the earlier guidance of $5.00-$5.20. Organic sales are anticipated to increase 7-8% versus 3-3.5% expected earlier, while total revenues are forecasted to increase 9-10% against the prior prediction of 5-5.5%.
In the past 60 days, the company’s earnings estimates for 2018 and 2019 have been revised upward by eight brokerage firms. The Zacks Consensus Estimate now stands at $5.54 for 2018 and $6.21 for 2019, reflecting growth of 4.7% from the respective 60-day-ago tallies.
Ingersoll-Rand PLC (Ireland) Price and Consensus
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