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Ingersoll (IR) Sells Majority Stake in High Pressure Solutions

·4 min read

Ingersoll Rand Inc. IR announced that it completed the sale of the majority stake of its High Pressure Solutions segment. The other party to the transaction was American Industrial Partners and the divestment value was fixed at $300 million.

The divestment agreement was signed by the parties on Feb 16, 2021.

It is worth mentioning here that Ingersoll’s shares gained 0.8% on Apr 1, ending the trading session at $49.61.

Private equity firm, American Industrial invests in industrial businesses that are actively serving the U.S. and international markets. Notably, this New York-based firm is managing assets worth more than $7 billion for many of its clients (including financial, pension and endowment institutions).

Inside the Headlines

Ingersoll’s High Pressure Solutions segment comprises the Petroleum and Industrial Pump business of Gardner Denver. Its pumps, fluid ends and consumables are primarily used for oil and gas development activities. The segment accounted for 3% of Ingersoll’s net revenues in the fourth quarter of 2020.

As part of the agreement between the parties, Ingersoll will retain 45% common equity interest in the divested business.

The stake sale has helped Ingersoll to reduce its exposure to the upstream oil & gas market. Revenues sourced from this end now will be less than 2% for the company. On the other hand, the company now stands to focus on its higher-growth markets like life sciences, renewable energy and water.

In the first quarter of 2021, the High Pressure Solutions segment’s result will be considered as discontinued operations. Equity method earnings will be used for the segment, going forward. For 2021, Ingersoll anticipates year-over-year revenue growth in the high-single-digit and low-double-digit range. The impact of the High Pressure Solutions segment is not considered in the yearly projections.

Ingersoll’s Inorganic Activities

In addition to the above-mentioned stake sale, Ingersoll acquired Springfield, MO-based Tuthill Vacuum and Blower Systems so far in 2021. The transaction value was fixed at $184 million in cash.

As noted, the addition of Tuthill Vacuum and Blower Systems to Ingersoll’s portfolio is anticipated to strengthen the latter’s existing vacuum and blowers product offerings as well as enhance technical capabilities. Further, Tuthill Vacuum and Blower Systems’ presence in multiple end markets, especially those in the Americas, and the employee base will likely prove to be boons for Ingersoll.

The acquired assets are now part of Ingersoll’s Industrial Technologies and Services segment.

Zacks Rank, Price Performance and Estimate Trend

With a market capitalization of $20.8 billion, the company currently carries a Zacks Rank #3 (Hold). Solid product offerings, zeal to innovate and synergistic gains from acquired assets are likely to aid the company in the quarters ahead. However, issues with international exposure and high costs might be concerning.

In the past three months, the company’s stock has gained 6.3% compared with the industry’s growth of 83.8%.

The Zacks Consensus Estimate for Ingersoll’s earnings is pegged at $1.86 for 2021 and $2.15 for 2022, reflecting growth of 2.8% and 0.5% from the 60-day-ago figures. Also, the estimate for first-quarter 2021 earnings at 35 cents reflects growth of 2.9% from the 60-day-ago figure of 39 cents.

Ingersoll Rand Inc. Price and Consensus

Ingersoll Rand Inc. Price and Consensus
Ingersoll Rand Inc. Price and Consensus

Ingersoll Rand Inc. price-consensus-chart | Ingersoll Rand Inc. Quote

Stocks to Consider

Three better-ranked stocks in the industry are Chart Industries, Inc. GTLS, EnPro Industries, Inc. NPO and Applied Industrial Technologies, Inc. AIT. While Chart Industries and EnPro currently sport a Zacks Rank #1 (Strong Buy), Applied Industrial carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, earnings estimates for these companies have improved for the current year. Further, earnings surprise for the last reported quarter was 58.75% for Chart Industries, 143.14% for EnPro and 28.95% for Applied Industrial.

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