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Industrial goods manufacturer Ingersoll-Rand Plc (IR - Free Report) reported modest third-quarter 2016 results with net earnings of $377.4 million or $1.44 per share compared with $300.9 million or $1.12 per share in the year-earlier quarter. The year-over-year increase in GAAP earnings was primarily attributable to higher revenues during the reported quarter.
Excluding non-recurring items, adjusted earnings from continuing operations in the reported quarter were $1.41 per share compared with $1.21 in the year-ago quarter. Adjusted earnings from continuing operations beat the Zacks Consensus Estimate by 12 cents.
Quarterly revenues were $3,567.8 million, up 2% from $3,486.9 million recorded in the year-ago quarter. Revenues beat the Zacks Consensus Estimate of $3,552 million. Meanwhile, organic revenues improved 3% year over year. While organic revenues from North America increased 4%, the same from International markets rose slightly compared with the prior-year period.
Climate segment recorded sales of $2,838 million in the third quarter compared with $2,758 million in the year-ago quarter. The upside was driven by mid-single digit percentage increase in commercial HVAC (heating, ventilation and air conditioning) revenues.
Industrial segment posted revenues of $730 million in the reported quarter, up from $729 million in the prior-year quarter. Organic revenues declined by low-single digits in the U.S., which was offset by international gains in both Asia and EMEA.
Margins
Operating margin for the third quarter was 14.1% compared with 13.6% in the year-ago quarter. Adjusted operating margin expanded to 14.3% from 14.0% in the prior-year quarter. Adjusted operating margin for the Climate segment was 16.7% compared with 15.8% in the year-ago quarter. Adjusted operating margin for the Industrial segment was 11.6%, down from 14.4% in the year-ago quarter, due to a decline in volumes and mix and other inflation, partially offset by productivity gains and price realization.
Balance Sheet and Cash Flow
As of Sep 30, 2016, cash and cash equivalents totaled $1,504.6 million while long-term debt was $3,708.9 million. Net cash from operating activities for the first nine months of 2016 grossed $1,102.4 million compared with $253 million in the prior-year period. Working capital was 4.9% of revenues at the end of the quarter compared with 5.4% in the year-earlier quarter, representing a 50 basis point improvement. Free cash flow was $992 million, up substantially from $465 million in the year-ago quarter.
Outlook
For 2016, management expects slow-to-moderate growth in the global construction and retrofit markets, and slow recovery in industrial markets. The company anticipates organic revenue to increase of 2% year over year while reported revenues are expected to be flat to up 1% year over year.
Ingersoll raised its adjusted earnings from continuing operations guidance to $4.17 to $4.22 from the earlier expectation of $4.00 to $4.10 per share. Adjusted free cash flow for the year is estimated to be approximately $1.3 billion, up from $1.0 billion to $1.1 billion projected earlier.
For fourth-quarter 2016, Ingersoll projects organic revenue to be flat to up 1%. Adjusted earnings from continuing operations are expected in the range of 88–93 cents, excluding EPS of loss of 2 cents per share for restructuring.
Acacia Research has a modest earnings record, beating estimates once in the four trailing quarters, with an average positive surprise of 92.86%. The company’s share price has increased by approximately 43.36% year to date.
Chart Industries has a modest earnings record, beating estimates thrice in the four trailing quarters, with an average positive surprise of 428.37%. The company’s share price has increased by approximately 72.61% year to date.
Barnes Group has a forward PE of 15.69x and long-term growth rate of 9%. The company’s share price has increased by approximately 11.50% year to date.
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Ingersoll (IR) Beats Q3 Earnings Estimates, Raises '16 View
Industrial goods manufacturer Ingersoll-Rand Plc (IR - Free Report) reported modest third-quarter 2016 results with net earnings of $377.4 million or $1.44 per share compared with $300.9 million or $1.12 per share in the year-earlier quarter. The year-over-year increase in GAAP earnings was primarily attributable to higher revenues during the reported quarter.
Excluding non-recurring items, adjusted earnings from continuing operations in the reported quarter were $1.41 per share compared with $1.21 in the year-ago quarter. Adjusted earnings from continuing operations beat the Zacks Consensus Estimate by 12 cents.
Quarterly revenues were $3,567.8 million, up 2% from $3,486.9 million recorded in the year-ago quarter. Revenues beat the Zacks Consensus Estimate of $3,552 million. Meanwhile, organic revenues improved 3% year over year. While organic revenues from North America increased 4%, the same from International markets rose slightly compared with the prior-year period.
INGERSOLL RAND Price, Consensus and EPS Surprise
INGERSOLL RAND Price, Consensus and EPS Surprise | INGERSOLL RAND Quote
Segmental Performance
Climate segment recorded sales of $2,838 million in the third quarter compared with $2,758 million in the year-ago quarter. The upside was driven by mid-single digit percentage increase in commercial HVAC (heating, ventilation and air conditioning) revenues.
Industrial segment posted revenues of $730 million in the reported quarter, up from $729 million in the prior-year quarter. Organic revenues declined by low-single digits in the U.S., which was offset by international gains in both Asia and EMEA.
Margins
Operating margin for the third quarter was 14.1% compared with 13.6% in the year-ago quarter. Adjusted operating margin expanded to 14.3% from 14.0% in the prior-year quarter. Adjusted operating margin for the Climate segment was 16.7% compared with 15.8% in the year-ago quarter. Adjusted operating margin for the Industrial segment was 11.6%, down from 14.4% in the year-ago quarter, due to a decline in volumes and mix and other inflation, partially offset by productivity gains and price realization.
Balance Sheet and Cash Flow
As of Sep 30, 2016, cash and cash equivalents totaled $1,504.6 million while long-term debt was $3,708.9 million. Net cash from operating activities for the first nine months of 2016 grossed $1,102.4 million compared with $253 million in the prior-year period. Working capital was 4.9% of revenues at the end of the quarter compared with 5.4% in the year-earlier quarter, representing a 50 basis point improvement. Free cash flow was $992 million, up substantially from $465 million in the year-ago quarter.
Outlook
For 2016, management expects slow-to-moderate growth in the global construction and retrofit markets, and slow recovery in industrial markets. The company anticipates organic revenue to increase of 2% year over year while reported revenues are expected to be flat to up 1% year over year.
Ingersoll raised its adjusted earnings from continuing operations guidance to $4.17 to $4.22 from the earlier expectation of $4.00 to $4.10 per share. Adjusted free cash flow for the year is estimated to be approximately $1.3 billion, up from $1.0 billion to $1.1 billion projected earlier.
For fourth-quarter 2016, Ingersoll projects organic revenue to be flat to up 1%. Adjusted earnings from continuing operations are expected in the range of 88–93 cents, excluding EPS of loss of 2 cents per share for restructuring.
Ingersoll currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include Chart Industries Inc. (GTLS - Free Report) , Barnes Group Inc. (B - Free Report) and Acacia Research Corporation (ACTG - Free Report) . All three stocks hold a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Acacia Research has a modest earnings record, beating estimates once in the four trailing quarters, with an average positive surprise of 92.86%. The company’s share price has increased by approximately 43.36% year to date.
Chart Industries has a modest earnings record, beating estimates thrice in the four trailing quarters, with an average positive surprise of 428.37%. The company’s share price has increased by approximately 72.61% year to date.
Barnes Group has a forward PE of 15.69x and long-term growth rate of 9%. The company’s share price has increased by approximately 11.50% year to date.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>