Why Is Ingersoll (IR) Up 5.7% Since Last Earnings Report?
It has been about a month since the last earnings report for Ingersoll Rand (IR). Shares have added about 5.7% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Ingersoll due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Ingersoll Rand Q3 Earnings & Revenues Surpass Estimates
Ingersoll Rand reported better-than-expected third-quarter 2022 results, wherein earnings surpassed estimates by 5.1% and sales beat the same by 4.5%.
Its adjusted quarterly earnings were 62 cents per share, reflecting growth of 8.8% from the year-ago quarter’s 57 cents. This compares with our estimate of 60 cents. The bottom line surpassed the Zacks Consensus Estimate of 59 cents.
Revenue Details
In the quarter under review, Ingersoll Rand’s revenues of $1,515.7 million reflected growth of 14.4% from the year-ago quarter. The increase was primarily attributed to organic revenue growth of 13.8%, a positive impact of 3.8% from acquisitions, partially offset by the adverse impact of 7.1% from movement in foreign currencies.
IR’s revenues compare with our estimate of $1,455.7 million. The revenues surpassed the Zacks Consensus Estimate of $1,451 million.
Orders in the quarter totaled $1,654.5 million, increasing 10.5% from the year-ago quarter.
Ingersoll Rand reports revenues under two segments. A brief discussion of the quarterly results is provided below:
Industrial Technologies & Services generated revenues of $1,199.6 million, accounting for 79.1% of net revenues in the reported quarter. This compares with the Zacks Consensus Estimate of $1,142.7 million. Sales increased 12% year over year on 18.6% growth in organic sales. Acquisitions contributed 0.7%, while movement in foreign currencies had a negative impact of 7.3%. The segment’s orders in the quarter grew 10.1%.
Precision & Science Technologies’ revenues totaled $316.1 million, representing 20.9% of net revenues in the quarter. This compares with the Zacks Consensus Estimate of $313 million. On a year-over-year basis, the segment’s revenues increased 24.3%. Organic sales grew 15.4%. Acquisitions had a positive impact of 17.7%, while movement in foreign currencies had a negative impact of 8.8%. The segment’s orders were up 12.4%.
Margin Profile
Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) in the quarter increased 20% year over year to $376 million. Margins increased 110 basis points (bps) to 24.8%.
On a segmental basis, the adjusted EBITDA margin increased 70 bps year over year to 26.2% for Industrial Technologies & Services and contracted 60 bps to 29.1% for Precision & Science Technologies.
Balance Sheet & Cash Flow
While exiting the third quarter of 2022, Ingersoll Rand had cash and cash equivalents of $1,459.5 million, decreasing from $2,109.6 million recorded in the fourth quarter of 2021. Long-term debt was $2,720.1 million, down 20% from $3,401.8 million recorded in the fourth quarter of 2021.
In the first nine months of 2022, Ingersoll Rand repaid $647.1 million of long-term debt and repurchased shares worth $257.8 million.
The company’s liquidity of $2.6 billion at the end of the third quarter comprised cash of $1.5 billion and credit under revolving facilities of $1.1 billion.
In the first nine months of 2022, IR generated net cash of $510.6 million from operating activities, up 34.1% year over year. Capital expenditure totaled $61.1 million compared with $41.2 million in the year-ago quarter. Free cash flow increased 32.3% to $ 449.5 million.
Outlook
For 2022, Ingersoll Rand anticipates revenue growth of 11-13% from the year-ago reported figure. On an organic basis, revenues are predicted to grow at a 12-14% rate compared with 11-13% anticipated earlier. Foreign currency translation is anticipated to hurt sales by 6% in 2022 compared with the 5% predicted earlier. Contribution from mergers/acquisitions is anticipated at $225 million.
For the Industrial Technologies & Services segment, IR expects organic sales growth of 12-14% compared with 11-13% predicted earlier. Organic sales growth for Precision & Science Technologies is anticipated to be 10-12% compared with 9-11% expected earlier.
Adjusted EBITDA is anticipated to be $1,400-$1,425 million for the year compared with $1,395-$1,425 million predicted earlier.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -5.65% due to these changes.
VGM Scores
Currently, Ingersoll has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Ingersoll has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Ingersoll belongs to the Zacks Manufacturing - General Industrial industry. Another stock from the same industry, Altra Industrial Motion (AIMC), has gained 0.8% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.
Altra reported revenues of $466.3 million in the last reported quarter, representing a year-over-year change of -0.6%. EPS of $0.80 for the same period compares with $0.80 a year ago.
Altra is expected to post earnings of $0.77 per share for the current quarter, representing a year-over-year change of +14.9%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
Altra has a Zacks Rank #4 (Sell) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
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