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Ingersoll Rand (IR) Tops Q2 Earnings Estimates, Hikes '21 View

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Ingersoll Rand Inc. IR delivered impressive results for second-quarter 2021. Its earnings surpassed estimates by 15% and sales exceeded the same by 7.49%. Notably, the quarter’s earnings beat was the company’s fifth consecutive quarter of better-than-expected results.

Its adjusted quarterly earnings were 46 cents per share, reflecting growth of 58.6% from the year-ago quarter’s 29 cents. The bottom line gained from revenue growth and margin expansion. The bottom line surpassed the Zacks Consensus Estimate of 40 cents.

Revenue Details

In the quarter under review, Ingersoll Rand’s revenues of $1,279.1 million reflected growth of 24.7% from the year-ago quarter’s number. Organic sales in the quarter expanded 16% year over year, while acquisition had a positive 2.6% impact. Movements in foreign currencies had a positive impact of 6.1%.

The company’s revenues surpassed the Zacks Consensus Estimate of $1,190 million.

Orders in the quarter totaled $1,459 million, increasing 47.5% from the year-ago quarter’s number.

It is worth noting here that Ingersoll Rand completed the divestment of a majority stake in its High Pressure Solutions business on Apr 1, 2021. The other party to the transaction was American Industrial Partners. The High Pressure Solutions business has been classified as discontinued operations, beginning first-quarter 2021.

Ingersoll Rand divested its Specialty Vehicle Technologies segment to Platinum Equity — a global private equity firm — on Jun 1, 2021. The transaction was valued at $1.68 billion. The divested business has been classified as discontinued operations, beginning second-quarter 2021.

The company now reports revenues under two segments. A brief discussion of the quarterly results is provided below:

Industrial Technologies & Services generated revenues of $1,047.5 million, accounting for 81.9% of net revenues in the reported quarter. Sales increased 26.3% year over year on 17% growth in organic sales. Movements in foreign currencies had a positive impact of 6.3% and acquisitions contributed 3%. The segment’s orders in the quarter grew 52.8%.

Precision & Science Technologies’ revenues totaled $231.6 million, representing 18.1% of net revenues in the second quarter. On a year-over-year basis, the segment’s revenues increased 18.3%. Organic sales grew 11.8%, while movements in foreign currencies contributed 5.3%. Acquisitions had a positive impact of 1.2%. The segment’s orders were up 26.8%.

Margin Profile

Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) in the quarter increased 34.3% year over year to $292.1 million. Also, margins increased 160 basis points (bps) to 22.8%.

On a segmental basis, adjusted EBITDA margin increased 250 bps year over year to 24.7% for Industrial Technologies & Services, and jumped 40 bps to 30.7% for Precision & Science Technologies.

Balance Sheet & Cash Flow

Exiting the second quarter of 2021, Ingersoll Rand had cash and cash equivalents of $3,669.9 million, increasing from $1,639.6 million recorded in the last reported quarter. Long-term debt was stable sequentially at $3,823.3 million.

In the first half of 2021, the company repaid $19.7 million of long-term debts and repurchased shares worth $3.2 million.

Its liquidity of $4.7 billion at the end of the second quarter of 2021 comprised cash of $3.7 billion and credit under revolving facilities of $1 billion.

In the second quarter, it generated net cash of $147.3 million from operating activities, decreasing 25.9% from the year-ago quarter. Capital expenditure totaled $11.6 million versus $15.6 million in the previous year’s comparable quarter. Free cash flow decreased 25.9% to $135.7 million.

Buyouts

On Jun 28, 2021, Ingersoll Rand agreed to acquire Montreal, Canada-based Maximus. The transaction has been valued at CAD$135.4 million in cash and is expected to be completed in the third quarter of 2021.

Also, the company agreed to acquire Bottrop, Germany-based Seepex GmbH on Jun 21, 2021. The transaction has been valued at €431.5 million in cash and will be complete in the third quarter of 2021.

Outlook

Ingersoll Rand hiked its projections for 2021. It now anticipates revenue growth in mid-teens (on a year-over-year basis) for the year. The projection represents an improvement from low-double-digit sales growth mentioned earlier. Foreign currency translation is anticipated to boost sales by low-single digits or 3% in 2021, versus 2% mentioned previously. Contribution from mergers/acquisitions is anticipated to be $60 million.

For both the Industrial Technologies & Services and Precision & Science Technologies segments, the company expects organic sales growth in low-double digits as compared with high-single digits stated previously.

Adjusted EBITDA is anticipated to be $1.15-$1.18 billion for the year. The projection reflects an improvement from $1.12-$1.15 billion mentioned earlier. Free cash flow conversion is expected to be in excess of 100%.

Ingersoll Rand Inc. Price, Consensus and EPS Surprise

Ingersoll Rand Inc. Price, Consensus and EPS Surprise
Ingersoll Rand Inc. Price, Consensus and EPS Surprise

Ingersoll Rand Inc. price-consensus-eps-surprise-chart | Ingersoll Rand Inc. Quote

Zacks Rank & Stocks to Consider

With a market capitalization of $20.2 billion, Ingersoll Rand currently carries a Zacks Rank #3 (Hold).

Three better-ranked stocks in the industry are The Middleby Corporation MIDD, Altra Industrial Motion Corp. AIMC and Applied Industrial Technologies, Inc. AIT. While Middleby currently sports a Zacks Rank #1 (Strong Buy), both Altra Industrial and Applied Industrial carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, earnings estimates for these companies improved for the current year. Further, earnings surprise for the last reported quarter was 9.82% for Middleby, 8.54% for Altra Industrial and 35.64% for Applied Industrial.


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