Ingersoll (IR) to Gain From Business Strength Amid Headwinds

Zacks Equity Research
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Ingersoll Rand Inc. IR stands to benefit from solid demand for the company’s vacuum pumps, blowers and compressors, along with strength in its medical, dosatron and specialty businesses, in the quarters ahead. The company’s investments in the digital, Industrial Internet of Things (IIoT) and the e-commerce space are also likely to drive its performance. For 2022, it anticipates revenue to grow 11-13% on a year-over-year basis.

The company intends to strengthen and expand its businesses by adding assets. In December 2021, it acquired Tuthill Pump Group, which is expected to boost its pumping solution offerings. Some of the other notable buyouts made by the company in 2021 are Air Dimensions Inc. in October, Seepex in September, Maximus in August and Tuthill Vacuum and Blower Systems in February 2021. Buyouts positively impacted the company’s revenues by 6.3% in fourth-quarter 2021.

Ingersoll Rand remains committed to rewarding shareholders through dividend payouts and share buybacks. In 2021, the company paid dividends worth $8.2 million and repurchased shares worth $736.8 million. Also, in October 2021, it announced a new dividend program for its shareholders.

However, IR has been dealing with escalating costs and expenses over time. In fourth-quarter 2021, its costs of sales increased 20.4% year over year, while its selling and administrative expenses were up 15.2%. Inflation in logistics and direct material costs might affect its margins and profitability in the near term.

Ingersoll Rand’s international presence exposes it to headwinds arising from global political and economic risks as well as unfavorable movements in foreign currencies. For instance, foreign exchange headwinds adversely impacted its sales by 1.2% in the fourth quarter of 2021.

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In the past six months, the Zacks Rank #3 (Hold) stock has lost 11.4% compared with the industry’s decline of 12.9%.

Stocks to Consider

Some better-ranked companies from the Zacks Industrial Products sector are discussed below.

Nordson Corporation NDSN presently has a Zacks Rank of 2 (Buy). Its earnings surprise in the last four quarters was 9.9%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past 60 days, NDSN’s earnings estimates have increased 1.1% for fiscal 2022 (ending October 2022). Nordson’s shares have declined 11.2% in the past six months.

Donaldson Company, Inc. DCI presently carries a Zacks Rank #2. DCI delivered a trailing four-quarter earnings surprise of 4.2%, on average.

Earnings estimates for DCI have increased 0.7% for fiscal 2022 (ending July 2022) in the past 60 days. Its shares have lost 14.1% in the past six months.

Ferguson plc FERG is presently Zacks #2 Ranked. Its earnings surprise in the last four quarters was 14.2%, on average.

In the past 60 days, earnings estimates for FERG have increased 7% for fiscal 2022 (ending July 2022). The stock has declined 8.9% in the past six months.


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