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Ingersoll Rand Inc. IR seems to be an attractive investment option for investors seeking exposure in the manufacturing space. Impressive financial performance, solid growth opportunities and hike in earnings estimates add to its investment appeal.
The company currently has a market capitalization of $21.2 billion and sports a Zacks Rank #1 (Strong Buy). It engages in providing industrial and mission-critical flow creation technologies.
It belongs to the Zacks Manufacturing - General Industrial industry, which comes under the ambit of the Zacks Industrial Products sector. The industry is among the top 30% (with the rank of 75) of more than 250 Zacks industries.
In the past three months, the company’s shares have gained 1.8% against the industry’s decline of 3% and the sector’s fall of 0.4%. The S&P 500 advanced 6.2% during the same timeframe.
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Below we discussed why Ingersoll is a worthy investment option.
Performance and Projections: The company reported impressive second-quarter 2021 results. Its earnings surpassed estimates by 15%, whereas sales exceeded the same by 7.49%. Revenue growth and expansion in margins aided the bottom-line results.
In the quarters ahead, the company is poised to benefit from its solid product offerings, exposure in various end markets, and investments to innovate. Strengthening aftermarket business, along with healthy e-commerce sales, is anticipated to be beneficial.
Ingersoll anticipates revenues to grow in mid-teens from the previous year compared with low-double-digit growth mentioned earlier. Organic sales growth is expected to be in low-double digits (versus high-single digits stated previously) for both Precision & Science Technologies and Industrial Technologies & Services segments.
Buyouts/Divestments: The company is gaining from its buyout activities over time. In second-quarter 2021, the company’s acquired assets boosted sales by 2.6%. For 2021, the company anticipates buyouts to augment sales by $60 million.
In September 2020, Ingersoll acquired Albin Pump SAS while added Tuthill Vacuum and Blower Systems to its portfolio in February 2021. In June 2021, it signed an agreement to buy Seepex GmbH. Upon completion of the acquisition in third-quarter 2021, Seepex will be added to Ingersoll’s Precision & Science Technologies segment. In August, the company purchased Maximus and added it to the Precision & Science Technologies segment.
Divestments of non-core business too proved advantageous. Ingersoll sold the majority stake of its High Pressure Solutions segment in April. It divested the Specialty Vehicle Technologies segment in June. The High Pressure Solutions transaction has helped in reducing Ingersoll’s exposure in the upstream oil & gas market. Also, the Specialty Vehicle Technologies transaction and helped in directing resources to the core mission-critical flow creation technologies and industrial solutions.
Cost Actions: In the first three years of its formation in February 2020, Ingersoll anticipates realizing cost savings $300 million. This includes savings of $115 million realized in 2020 as well as $100 million, $50 million and $35 million expected in 2021, 2022 and 2023, respectively. Already executed or on-going actions are expected to results in savings of $250 million — comprising $110 million in structural reductions, $25 million of footprint and other functional costs savings, $85 million of procurement savings and $30 million of i2V savings.
Earnings Estimate Revisions: In the past 30 days, the company’s earnings estimates have been revised upward. Currently, the Zacks Consensus Estimate is pegged at 47 cents per share for the third quarter of 2021, up 6.8% from the 30-day-ago figure.
Ingersoll Rand Inc. Price and Consensus
Earnings estimates are pegged at $1.83 for 2021 and $2.11 for 2022, mirroring increases of 6.4% and 4.5% from the 30-day-ago figures, respectively.
Other Key Picks
Some other top-ranked stocks in the industry are Kadant Inc. KAI, Altra Industrial Motion Corp. AIMC and Dover Corporation DOV. While Kadant currently sports a Zacks Rank #1, both Altra Industrial and Dover 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 have improved for the current year. The earnings surprise for the last reported quarter was 33.11% for Kadant, 8.54% for Altra Industrial and 11.96% for Dover.
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