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Ingersoll-Rand (IR) Displays Bright Prospects, Risks Persist

Zacks Equity Research

On Mar 26, we issued an updated research report on Ingersoll-Rand plc IR.

Over the past six months, this Zacks Rank #3 (Hold) stock has returned 2% against the industry’s decline of 4.8%.

Existing Scenario

Ingersoll believes that strength in the Commercial HVAC markets, as well as continued strength in Transport Solutions, Industrial Fluid Management, Tools and Material Handling businesses will drive its revenues in the quarters ahead. Also, it will benefit from solid backlog and effective operating system. For 2019, the company anticipates revenues to increase 4-5% year over year, including organic sales growth of 5-6%.

Moreover, the company anticipates that robust sales volume, increased productivity and its pricing actions will boost profitability. In addition, Ingersoll’s investments toward plant consolidation projects for Commercial HVAC, product development and information technology will drive competency.

Further, the company intends to boost its near-term revenues and profitability on the back of acquisitions & mergers. In this regard, Ingersoll’s agreement to acquire Precision Flow Systems (inked in February 2019) will strengthen its existing fluid management business. This buyout is likely to enhance margins and prove accretive to earnings in the first year of completion.

However, at the end of 2018, Ingersoll's long-term debt was $3,740.7 million, up roughly 26.5% from 2017. Notably, the company raised $24 million through long-term borrowings in 2018 while its interest expenses increased 2.3% year over year. We believe that fresh issuances in the quarters ahead will further elevate the company's debts and hence, increase its financial obligations.

In addition, material cost inflation, rising pension-related expenses and ongoing restructuring expenses might weigh over Ingersoll's near-term profitability.

Key Picks

Some better-ranked stocks in the same space are DXP Enterprises, Inc. DXPE, Roper Technologies, Inc. ROP and Tennant Company TNC. While DXP Enterprises sports a Zacks Rank #1 (Strong Buy), Roper and Tennant carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

DXP Enterprises surpassed estimates thrice in the trailing four quarters, the average being 46.55%.

Roper exceeded estimates in each of the trailing four quarters, the average being 4.96%.

Tennant surpassed estimates in each of the trailing four quarters, the average being 48.53%.

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Roper Technologies, Inc. (ROP) : Free Stock Analysis Report
 
Ingersoll-Rand PLC (Ireland) (IR) : Free Stock Analysis Report
 
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Tennant Company (TNC) : Free Stock Analysis Report
 
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