Here's Why You Should Avoid Betting on Ingersoll Rand Now
Ingersoll Rand Inc. IR has failed to impress investors with its recent operational performance, owing to difficult end-market conditions amid the coronavirus outbreak and other woes, which are expected to adversely impact its earnings.
The Zacks Rank #5 (Strong Sell) company has a market capitalization of $15 billion. Year to date, it has declined 1.9% compared with the industry’s fall of 4.8%.
Let’s delve into the factors that might continue to take a toll on the firm.
Weak Demand Environment: The coronavirus outbreak-led market downturn has been affecting Ingersoll Rand’s businesses. Notably, weak demand for its products, particularly across the general Industrial end-markets is likely to continue to adversely impact its top-line performance in the quarters ahead. For the third quarter of 2020, the company expects slow recovery in markets and near-term savings achieved in the second quarter to hurt results to the tune of $30-$35 million. For 2020, it has refrained from providing projections owing to the uncertainties related to the pandemic.
High Debt Level: High debt level remains a major concern for the company. For instance, exiting the second quarter of 2020, its long-term debt was $3,816.7 million, reflecting an increase of 11.4% on a sequential basis. Also, interest expenses in the quarter surged 37.5% year over year to $30.8 million. Moreover, its total debt to total capital increased to 30.9% at the end of second quarter from 28.3% recorded at the previous quarter. It is worth noting here that the company expects leverage to increase in the short term.
Forex Woes: Given its widespread presence in international markets, the company is exposed to unfavorable foreign currency movements. For instance, in the first and second quarters of 2020, foreign exchange headwinds hurt its top-line performance by 1.4% and 1.6%, respectively. A stronger U.S. dollar might further depress the company's overseas business’s results in the quarters ahead.
Ingersoll Rand Inc. Price and Consensus
Ingersoll Rand Inc. price-consensus-chart | Ingersoll Rand Inc. Quote
Stocks to Consider
Some better-ranked stocks from the same space are Kaman Corporation KAMN, EnPro Industries NPO and Tennant Company TNC. All the companies currently sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Kaman delivered a positive earnings surprise of 30.42%, on average, in the trailing four quarters.
EnPro delivered a positive earnings surprise of 248.29%, on average, in the trailing four quarters.
Tennant delivered a positive earnings surprise of 107.12%, on average, in the trailing four quarters.
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Ingersoll Rand Inc. (IR) : Free Stock Analysis Report
Kaman Corporation (KAMN) : Free Stock Analysis Report
EnPro Industries (NPO) : Free Stock Analysis Report
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