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Ingersoll-Rand Buys PFS, Boosts Fluid Management Business

Zacks Equity Research

Ingersoll-Rand plc IR has completed the previously announced acquisition of Precision Flow Systems (“PFS”) for $1.45 billion. The other parties to the transaction include funds managed by BC Partners Advisors L.P. and The Carlyle Group L.P. CG. The deal is in sync with the company’s policy of acquiring businesses to gain access to new customers, regions and product lines.

Notably, PFS is primarily engaged in providing pump and flow management systems for use in process, agriculture, water, pharmaceuticals, food and beverage markets. Some of its leading product brands are Haskel, Milton Roy, Williams and others. Notably, PFS generated revenues of $400 million in 2018.

Ingersoll-Rand will work on integrating PFS assets with its Industrial segment’s (accounted for 21.6% of net revenues in the first quarter of 2019) fluid management business. The PFS acquisition will likely boost the company’s existing fluid management business through technical expertise, and the addition of about 1,000 workers and strong manufacturing units. As a matter of fact, the buyout is likely to strengthen margins and prove accretive to earnings in the first year of completion.

Our Take

The company intends to boost its near-term revenues and profitability on the back of M&As, and unique business strategies. In 2018, the company deployed nearly $285 million for M&As. In this context, the buyout of ICS Group Holdings (January 2018) has been strengthening Ingersoll-Rand’s commercial Heating, Ventilation and Air Conditioning (HVAC) business.Also, the company’s joint venture with Trane Mitsubishi (completed in May 2018) will strengthen its competency, going forward.

Further, stellar sales from the commercial HVAC markets, particularly in North America and Europe, residential HVAC, transport solutions, industrial fluid management businesses and strength in the compression technologies business in North America will bolster its revenues. Moreover, product development investments and solid backlog will likely support the upside.

Over the past six months, the Zacks Rank #2 (Buy) company has yielded a return of 7.3%, outperforming 2.1% rise recorded by the industry.

Other Key Picks

A couple of other top-ranked stocks from the same space are Dover Corporation DOV and Roper Technologies, Inc. ROP. Both of these stocks carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Dover surpassed estimates in each of the trailing four quarters, the average positive earnings surprise being 8.61%.

Roper exceeded estimates in each of the preceding four quarters, the average positive earnings surprise being 8.43%.

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The Carlyle Group L.P. (CG) : Free Stock Analysis Report
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