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Ingersoll Rand (IR) Displays Bright Prospects Amid Headwinds

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Zacks Equity Research
·3 min read
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On Nov 25, we issued an updated research report on Ingersoll Rand Inc. IR.

In the past three months, this Zacks Rank #3 (Hold) stock has returned 27.4% compared with the industry’s growth of 14.6%.

Present Scenario

Ingersoll Rand is poised to benefit from its solid product portfolio, strong innovation capabilities and focus on increasing aftermarket businesses in the quarters ahead. Also, the company’s investments in digital, IoT and e-commerce space will likely be beneficial. Moreover, its diversified business structure allows it to mitigate the adverse impacts of weakness in one end-market, with strength across others. Notably, Ingersoll Rand anticipates its revenues to grow in the fourth quarter of 2020, on a sequential basis.

Also, the company’s acquisition of Albin Pump SAS (in September 2020) is expected to strengthen its offerings in the fluid management space. The buyout is a part of the company’s Precision & Science Technologies segment. In the third quarter, acquisitions had a positive impact of 0.3% on the company’s revenues.

In addition, Ingersoll Rand’s strong liquidity position of $2.3 billion — comprising cash of $1.3 billion and credit facilities of $997 million — will likely help it effectively deal with its financial obligations.

However, the company anticipates unfavorable product mix to have an adverse impact on the performance of its Precision & Science Technologies segment in the fourth quarter. Also, shift toward growth opportunities (which generally carries low margins) might influence the Specialty Vehicle Technologies’ performance. Also, the company is wary about the coronavirus outbreak-related uncertainties in the upcoming quarters.

Further, the company is exposed to headwinds stemming from movements in foreign currencies, which might hurt the top line in the quarters ahead. In the third quarter, unfavorable movements in foreign currencies had an adverse impact of 0.2% on both orders and revenues of the company’s High Pressure Solutions segment.

Key Picks

Some better-ranked stocks from the same space are Altra Industrial Motion Corp. AIMC, Applied Industrial Technologies, Inc. AIT and Graco Inc. GGG. While Altra Industrial sports a Zacks Rank #1 (Strong Buy), Applied Industrial and Graco carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Altra Industrial has a trailing four-quarter earnings surprise of 50.07%, on average.

Applied Industrial has a trailing four-quarter earnings surprise of 14.68%, on average.

Graco has a trailing four-quarter earnings surprise of 21.74%, on average.

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Zacks Investment Research