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Will Ingersoll-Rand (IR) Disappoint This Earnings Season?

Zacks Equity Research

Ingersoll-Rand plc IR is slated to report third-quarter 2019 results on Oct 29, before market open.

The company reported better-than-expected results in each of the last four reported quarters, the average positive earnings surprise being 4.87%. Ingersoll's second-quarter adjusted earnings of $2.09 per share outpaced the Zacks Consensus Estimate of $2.05.

Over the past three months, the company’s shares have lost 2.2% compared with 1.3% decline recorded by the industry it belongs to.

Factors to Consider

Escalating cost of sales remains a persistent concern for Ingersoll-Rand. In the second quarter of 2019, the company's cost of sales jumped 4.4% year over year on account of material inflation (resulting from tariffs and other inflationary pressures). High costs are likely to have adversely impacted the company’s margin and profitability in the third quarter as well.

Also, increasing liabilities pose a headwind for the company. Notably, at the end of the second quarter, its long-term debt was $4,920.6 million, up roughly 31.5% from 2018 end. The company’s short-term borrowings and current maturities of long-term debt exiting the prior quarter were $829.2 million, up 136.5% from 2018 end. Ingersoll-Rand’s profitability is expected to have been affected by high-debt levels in the to-be-reported quarter.

Further, the company’s significant international presence exposes it to political and economic disruptions. Also, it is exposed to unfavorable movements in foreign currencies. In the second quarter, forex woes had an adverse impact of 1% on its sales. These are expected to have affected Ingersoll-Rand’s revenues in the third quarter as well.

The Zacks Consensus Estimate for third-quarter revenues of Ingersoll-Rand's Climate Solutions segment is pegged at $3,364 million, indicating growth of 3.9% from the year-ago reported number. The consensus mark for Industrial Technologies segment’s revenues stands at $905 million, implying 14.3% increase.

Earnings Whispers

According to our quantitative model a stock needs to have the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or at least 3 (Hold) to increase the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

But that is not the case here as we will see below.

Earnings ESP: Ingersoll-Rand has an Earnings ESP of -0.47% as the Most Accurate Estimate is pegged at $1.90, lower than the Zacks Consensus Estimate of $1.91.

Ingersoll-Rand PLC (Ireland) Price and EPS Surprise

Ingersoll-Rand PLC (Ireland) Price and EPS Surprise

Ingersoll-Rand PLC (Ireland) price-eps-surprise | Ingersoll-Rand PLC (Ireland) Quote

Zacks Rank: Ingersoll-Rand carries a Zacks Rank #4 (Sell).

Key Picks

Here are some companies you may want to consider as our model shows that these have the right mix to beat estimates this earnings season:

Plug Power, Inc. PLUG has an Earnings ESP of +58.33% and a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Welbilt, Inc. WBT has an Earnings ESP of +1.01% and a Zacks Rank of 3.

Sealed Air Corporation SEE has an Earnings ESP of +2.40% and a Zacks Rank #3.

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