Ingersoll Beats on Q3 Earnings, Revenues Up Y/Y

Ingersoll-Rand Plc (IR) reported third-quarter 2014 net income of $291.3 million or $1.07 per share compared with $165.9 million or 56 cents per share in the year-earlier quarter. The year-over-year increase in earnings per share was due to higher revenues in the reported quarter.

Excluding non-recurring items, adjusted earnings from continuing operations for the reported quarter were $1.10 per share compared with 91 cents in the year-ago quarter. Adjusted earnings from continuing operations exceeded the Zacks Consensus Estimate of $1.04.

Ingersoll-Rand Company - Earnings Surprise | FindTheBest

Quarterly revenues of $3,385 million were slightly above the Zacks Consensus Estimate of $3,350 million and rose 5.0% year over year. Revenues from the U.S. and International segment were up 6% and 5%, respectively, compared with the year-ago period.

Segment Performance

Climate segment delivered sales of approximately $2,644 million in third quarter 2014 compared with $2,492.3 million in the year-ago quarter. The year-over-year increase was driven by mid single-digit increase in commercial HVAC (heating, ventilation, and air conditioning) revenues and mid single-digit improvement in revenues from parts, services and solutions.

Revenues from the Thermo King sub-segment also increased a mid-teens percentage, with gains in all equipment categories and in aftermarket revenues. Bookings increased by 20% in the reported quarter driven by strong orders for auxiliary power units, marine equipment and in the North American trailer business.

Industrial segment posted revenues of $741.0 million in the third quarter, up from $721.9 million in the prior-year period. Air compressors and industrial products revenues increased by low-single digit percentage in the reported quarter, while Club Car revenues increased slightly as sales growth in utility vehicles were offset by decreased activity in the North American golf market.

Margins

Operating margin for the third quarter of 2014 was 13.0% compared with 11.8% in the year-ago quarter. The operating margin for the Climate segment was 14.3% for the reported quarter and improved from 13.0% in the year-earlier quarter due to higher volumes, pricing, lower restructuring costs and productivity actions, partially offset by inflation. The operating margin for the Industrial segment was 14.7%, down from 15.9% in the year-ago quarter driven by inflation and higher investment spending, partially offset by higher volumes and productivity actions.

Balance Sheet and Cash Flow

At quarter end, cash and cash equivalents aggregated $936.7 million, while long-term debt stood at $2,646.6 million. Net cash from operating activities for nine months ended was $497.6 million compared with $882.0 million in the prior-year period. Capital expenditure for the first nine months of 2014 declined to $150.7 million from $175.5 million in the year-ago period. Working capital was 4.0% of revenues at the end of the reported quarter compared with 3.1% in the prior-year period.

Share Repurchase

The company repurchased approximately 2.6 million shares for approximately $160 million in the reported quarter as part of its $1.5 billion share repurchase program. During 2014, Ingersoll aims to repurchase a total of $1,375 million of shares under its share repurchase program.

Acquisition

Earlier in August, the company entered into an agreement to acquire the assets of Cameron International Corp.’s (CAM) Centrifugal Compression division for $850 million. The acquisition is expected to close before the end of this year and expected to expand the company’s Industrial Segment and likely be accretive to EPS, EBITDA margins and ROIC in 2015.

Outlook

For fourth quarter 2014, Ingersoll projects revenues to increase in the range of 3% to 4% with reported EPS from continuing operations in the range of 68 cents to 72 cents.

For full-year 2014, management continues to expect revenues to increase by 4% year over year due to moderate growth in global industrial and construction markets. Ingersoll expects reported earnings from continuing operations in the range of $3.17–$3.21. Adjusted earnings from continuing operations for 2014 are also expected to be in the range of $3.20 to $3.24. Free cash flow for the year is expected to be $800 to $850 million.

The market reacted positively as share prices went up in pre-market trading.

Ingersoll currently has a Zacks Rank #3 (Hold). Other stocks that look promising and are worth a look now include Manitex International, Inc (MNTX) and Nordson Corp. (NDSN), carrying a Zacks Rank #2 (Buy).

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