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Ingersoll (IR) Up 2.6% Since Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Ingersoll-Rand PLC (Ireland) (IR - Free Report) . Shares have added nearly 2.6% in that time frame, underperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it 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 Lags Q4 Earnings, 2017 Guidance Bullish
Ingersoll reported tepid fourth-quarter 2016 results with net earnings of $198.8 million or $0.75 per share compared with $233.5 million or $0.88 per share in the year-earlier quarter. The year-over-year decrease in GAAP earnings despite higher revenues was primarily attributable to higher operating and other expenses.
Excluding non-recurring items, adjusted earnings from continuing operations in the reported quarter were $0.84 per share compared with $0.94 in the year-ago quarter. Adjusted earnings from continuing operations missed the Zacks Consensus Estimate by $0.08.
For full year 2016, Ingersoll recorded GAAP earnings of $1,476.2 million or $5.65 per share compared with $664.6 million or $2.48 per share in 2015. Excluding non-recurring items, adjusted earnings from continuing operations in 2016 were $4.13 per share compared with $3.73 in 2015.
Quarterly revenues were $3,358.8 million, up from $3,325.8 million recorded in the year-ago quarter. Revenues beat the Zacks Consensus Estimate of $3,347 million. Meanwhile, organic revenues improved 2% year over year. While organic revenues from North America increased 6%, the same from International markets declined 4% compared with the prior-year period owing to below-par performances in Europe and the Middle East. For full year 2016, revenues improved to $13,508.9 million from $13,300.7 million in 2015 driven by strong growth in North American HVAC (heating, ventilation and air conditioning) business.
Segmental Performance
Climate segment recorded sales of $2,558.6 million compared with $2,492.0 million in the year-ago quarter. The upside was driven by solid revenues from commercial and residential HVAC businesses.
Industrial segment posted revenues of $800.2 million in the reported quarter, down from $833.8 million in the prior-year quarter owing to sharp decline in the material handling business.
Margins
Operating margin for the fourth quarter was 10.3% compared with 10.8% in the year-ago quarter. Adjusted operating margin contracted to 10.8% from 11.3% in the prior-year quarter. Adjusted operating margin for the Climate segment was 13.6% compared with 12.9% in the year-ago quarter. Adjusted operating margin for the Industrial segment was 11.4%, down from 13.8% in the year-ago quarter.
Balance Sheet and Cash Flow
As of Dec 31, 2016, cash and cash equivalents totaled $1,714.7 million while long-term debt was $3,709.4 million compared with the respective tallies of $736.8 million and $3,713.6 million in the year-ago period. Net cash from operating activities for 2016 grossed $1,500.2 million compared with $851.1 million in the prior-year period. Working capital was 3.4% of revenues for 2016 compared with 4.2% in 2015, representing an 80 basis point improvement. Free cash flow for 2016 was $1,345 million, up from $985 million in 2015.
Outlook
For full year 2017, management offered a relatively bullish guidance. The company anticipates organic revenue to improve 3%, while reported revenues are expected to be up 2% year over year.
Ingersoll expects adjusted earnings from continuing operations to be in the range of $4.30 to $4.50 per share. Cash from operating activities is anticipated to be about $1.4 billion, while free cash flow is expected to be within $1.1 billion to $1.2 billion.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimate. There has been one upward revision for the current quarter.
At this time, Ingersoll's stock has a nice Growth Score of 'B', though it is lagging a lot on the momentum front with a 'D'. However, the stock was allocated a grade of 'B' on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the stock is suitable for value and growth investors.
Outlook
Estimates have been broadly trending upward for the stock. The magnitude of these revision also looks promising. Interestingly, the stock has a Zacks Rank #2 (Buy). We are expecting an inline return from the stock in the next few months.
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Ingersoll (IR) Up 2.6% Since Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Ingersoll-Rand PLC (Ireland) (IR - Free Report) . Shares have added nearly 2.6% in that time frame, underperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it 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 Lags Q4 Earnings, 2017 Guidance Bullish
Ingersoll reported tepid fourth-quarter 2016 results with net earnings of $198.8 million or $0.75 per share compared with $233.5 million or $0.88 per share in the year-earlier quarter. The year-over-year decrease in GAAP earnings despite higher revenues was primarily attributable to higher operating and other expenses.
Excluding non-recurring items, adjusted earnings from continuing operations in the reported quarter were $0.84 per share compared with $0.94 in the year-ago quarter. Adjusted earnings from continuing operations missed the Zacks Consensus Estimate by $0.08.
For full year 2016, Ingersoll recorded GAAP earnings of $1,476.2 million or $5.65 per share compared with $664.6 million or $2.48 per share in 2015. Excluding non-recurring items, adjusted earnings from continuing operations in 2016 were $4.13 per share compared with $3.73 in 2015.
Quarterly revenues were $3,358.8 million, up from $3,325.8 million recorded in the year-ago quarter. Revenues beat the Zacks Consensus Estimate of $3,347 million. Meanwhile, organic revenues improved 2% year over year. While organic revenues from North America increased 6%, the same from International markets declined 4% compared with the prior-year period owing to below-par performances in Europe and the Middle East. For full year 2016, revenues improved to $13,508.9 million from $13,300.7 million in 2015 driven by strong growth in North American HVAC (heating, ventilation and air conditioning) business.
Segmental Performance
Climate segment recorded sales of $2,558.6 million compared with $2,492.0 million in the year-ago quarter. The upside was driven by solid revenues from commercial and residential HVAC businesses.
Industrial segment posted revenues of $800.2 million in the reported quarter, down from $833.8 million in the prior-year quarter owing to sharp decline in the material handling business.
Margins
Operating margin for the fourth quarter was 10.3% compared with 10.8% in the year-ago quarter. Adjusted operating margin contracted to 10.8% from 11.3% in the prior-year quarter. Adjusted operating margin for the Climate segment was 13.6% compared with 12.9% in the year-ago quarter. Adjusted operating margin for the Industrial segment was 11.4%, down from 13.8% in the year-ago quarter.
Balance Sheet and Cash Flow
As of Dec 31, 2016, cash and cash equivalents totaled $1,714.7 million while long-term debt was $3,709.4 million compared with the respective tallies of $736.8 million and $3,713.6 million in the year-ago period. Net cash from operating activities for 2016 grossed $1,500.2 million compared with $851.1 million in the prior-year period. Working capital was 3.4% of revenues for 2016 compared with 4.2% in 2015, representing an 80 basis point improvement. Free cash flow for 2016 was $1,345 million, up from $985 million in 2015.
Outlook
For full year 2017, management offered a relatively bullish guidance. The company anticipates organic revenue to improve 3%, while reported revenues are expected to be up 2% year over year.
Ingersoll expects adjusted earnings from continuing operations to be in the range of $4.30 to $4.50 per share. Cash from operating activities is anticipated to be about $1.4 billion, while free cash flow is expected to be within $1.1 billion to $1.2 billion.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimate. There has been one upward revision for the current quarter.
Ingersoll-Rand PLC (Ireland) Price and Consensus
Ingersoll-Rand PLC (Ireland) Price and Consensus | Ingersoll-Rand PLC (Ireland) Quote
VGM Scores
At this time, Ingersoll's stock has a nice Growth Score of 'B', though it is lagging a lot on the momentum front with a 'D'. However, the stock was allocated a grade of 'B' on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the stock is suitable for value and growth investors.
Outlook
Estimates have been broadly trending upward for the stock. The magnitude of these revision also looks promising. Interestingly, the stock has a Zacks Rank #2 (Buy). We are expecting an inline return from the stock in the next few months.