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Ingersoll Rand (IR) Q1 Earnings Miss Estimates, Fall Y/Y

Zacks Equity Research

Ingersoll Rand Inc. IR has reported weaker-than-expected results for the first quarter of 2020, with earnings lagging estimates by 19.4%.

It is worth mentioning here that the company came into existence when Gardner Denver Holdings, Inc. acquired the Industrial segment of Ingersoll-Rand plc in February 2020. It is a global industrial company, with expertise in mission-critical flow creation and industrial technologies.

For comparison purpose, the company has provided supplemental data, assuming the above-mentioned transaction was completed in January 2018.

Its adjusted earnings in the quarter under review were 27 cents per share, reflecting a year-over-year decline of 28.9%.

Further, its adjusted earnings (supplemental) were 25 cents per share, lagging the Zacks Consensus Estimate of 31 cents. Also, the bottom line decreased 32.4% from the year-ago quarter figure of 37 cents.

Revenue Details

Ingersoll Rand’s net sales were $799.9 million in the first quarter, reflecting a 29% increase from the year-ago quarter.

However, the company’s supplemental adjusted revenues were $1,269.8 million in the first quarter, reflecting a 15.3% decline from the year-ago quarter. Organic sales in the quarter declined 14% year over year, while acquisition had a positive 0.1% impact. However, unfavorable movements in foreign currencies had an adverse impact of 1.4%.

Also, the company’s revenues lagged the Zacks Consensus Estimate of $1,310 million by 3.1%.

Adjusted orders (supplemental) in the quarter decreased 8.3% year over year to $1,404.5 million.

The company reports revenues under four market segments. A brief discussion of the quarterly results (supplemental) is provided below:

The Industrial Technologies & Services segment generated revenues of $795.8 million, accounting for 62.7% of net revenues in the reported quarter. Sales decreased 18.5% year over year on a 16.9% fall in organic sales. Forex woes had an adverse 1.7% impact on sales and acquisitions had a 0.1% positive impact. The segment’s adjusted orders in the quarter decreased 11.3% year over year to $889.4 million.

Precision & Science Technologies’ revenues totaled $192.2 million, representing 15.1% of net revenues in the quarter under review. On a year-over-year basis, the segment’s revenues decreased 10% on an organic sales decline of 8.9% and forex woes of 1.4%. Acquisitions had a positive impact of 0.3%. The segment’s adjusted orders were flat year over year at $218.3 million.

The Specialty Vehicle Technologies segment generated revenues of $185.4 million, accounting for 14.6% of net revenues in the reported quarter. Sales increased 6.6% year over year on 7% growth in organic sales, partially offset by forex woes of 0.4%. The segment’s adjusted orders in the quarter increased 7.9% year over year to $213.3 million.

High Pressure Solutions’ revenues totaled $96.4 million, representing 7.6% of net revenues in the quarter under review. On a year-over-year basis, the segment’s revenues decreased 29.1% on a fall in organic sales of 28.6% and forex woes of 0.4%. The segment’s adjusted orders were down 25.8% year over year at $83.5 million.

Margin Profile

Supplemental adjusted earnings before interest, tax, depreciation and amortization (EBITDA) in the quarter decreased 24.4% year over year to $208.1 million. Margins, also, plummeted 200 basis points (bps) to 16.4%.
On a segmental basis, supplemental adjusted EBITDA margin decreased 150 bps year over year for Industrial Technologies & Services, while increased 120 bps to 27.7% for Precision & Science Technologies. However, margin for Specialty Vehicle Technologies segment decreased 80 bps year over year and plummeted 620 bps for High Pressure Solutions.

Balance Sheet & Cash Flow

Exiting the first quarter of 2020, Ingersoll Rand had cash and cash equivalents of $555.7 million, up 9.9% from $505.5 million recorded in the last reported quarter. Long-term debt surged 113.7% sequentially to $3,427.1 million.

During the quarter, the company repaid $1,591 million of its long-term debts, while also secured $1,586 million as proceeds from these debts.

In the first quarter of 2020, the company generated net cash of $68.4 million from operating activities, decreasing 0.6% year over year. Capital expenditure totaled $8.3 million versus $14.1 million in the previous year’s comparable quarter. Free cash flow rose 9.9% year over year to $60.1 million.

Outlook

The company noted that the safety of workers and customers remain top priorities in the present difficult environment. Also, it expects to deliver $80-$90 million of savings from the accelerated synergy actions related to the business combination of Ingersoll-Rand’s Industrial segment with Gardner Denver. This savings is part of $250 million savings expected from the transaction in the first three years of the completion.

The company has refrained from providing projections for 2020 due to the uncertainties related to the coronavirus outbreak.

Ingersoll Rand Inc Price and Consensus

 

Ingersoll Rand Inc Price and Consensus

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

Zacks Rank & Stocks to Consider

With a market capitalization of roughly $6 billion, Ingersoll Rand currently carries a Zacks Rank #3 (Hold).

Three better-ranked stocks in the Zacks Industrial Products sector are Silgan Holdings Inc. SLGN, Proto Labs, Inc. PRLB and Graphic Packaging Holding Company GPK. While Silgan currently sports a Zacks Rank #1 (Strong Buy), both Proto Labs and Graphic Packaging carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 30 days, earnings estimates for the companies improved for the current year. Further, earnings surprise for the last reported quarter was 16.33% for Silgan Holdings, 117.86% for Proto Labs and 24% for Graphic Packaging.

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