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On Jan 11, Zacks Investment Research upgraded industrial goods manufacturer Ingersoll-Rand Plc (IR - Analyst Report) to a Zacks Rank #3 (Hold) largely on the back of strong long-term fundamentals.

Ingersoll’s share price has steadily been on an uptrend since mid-2013. The stock hit a 52-week high of $62.89 on Jan 10, 2014, before closing the trading session a notch lower at $62.65 for a healthy year-over-year return of 57.7%. Despite its strong price appreciation, Ingersoll still has the wherewithal for the stock to climb up. The stock is currently trading at a forward P/E of 19.3x and has long-term earnings growth expectation of 15.0%.

Why the Upgrade?

On Dec 2, Ingersoll completed the spin-off of its commercial and residential security businesses into a separate standalone company. Ingersoll will not have any stake in this new company, which has been listed on New York Stock Exchange as Allegion plc (ALLE - Analyst Report). Ingersoll shareholders received one Allegion share for every three Ingersoll shares held at the close of business as of the record date of Nov 22, 2013.

The spin-off is expected to unlock value for the company’s shareholders. With the spin-off, Ingersoll will be able to strengthen its focus on core businesses. The restructuring initiative is aimed at driving its growth initiative, implementing a new business operating system and reducing complexity and overhead cost to improve margins.

On Oct 18, the company delivered solid third-quarter 2013 results beating the Zacks Consensus Estimate on both revenues and earnings. Adjusted earnings stood at $1.16, beating the Zacks Consensus Estimate by 7.4%. Quarterly revenues of $3,749 million beat the Zacks Consensus Estimate of $3,727 million and rose 4% year over year. All the four segments of the company reported year-over-year growth in revenues.

Over the last 7 days, the earnings estimates for Ingersoll did not show any upward or downward revision for 2013 and 2014. Despite the lack of estimate revisions, we anticipate an uptrend for the stock backed by its strong growth potential.

Other Stocks to Consider

Players in the industry worth reckoning include Altra Industrial Motion Corp. (AIMC - Snapshot Report) and Graco Inc. (GGG - Snapshot Report), each carrying a Zacks Rank #2 (Buy).

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