Ingersoll-Rand Beats Estimates

Ingersoll-Rand Plc (IR - Snapshot Report) reported adjusted earnings of 76 cents compared to 62 cents in the year-ago quarter and 81 cents in the last quarter, comprehensively beating the Zacks Consensus Estimate of 67 cents in the financial results of its fourth quarter of 2011.

Full year earnings amounted to $2.82 per share compared to $2.36 per share in 2010; above the Zacks Consensus Estimate of $2.72 per share.

Revenues

Sales amounted to $3.51 billion, falling 5% year over year and 10.7% sequentially. Total revenue, excluding the recently divested Hussmann business, was up approximately 1% year over year.

Geographically, revenues from U.S. markets were flat annually, whereas revenues from international operations grew 2% (3% excluding currency), mainly due to the increased Latin American sales partially offsetting weaknesses at the Asian regions.

Segment-wise, Climate Solutions delivered sales of $1.91 billion, decreasing 8% year over year and 16.6% sequentially, primarily attributable to the weakened sales of the Heating, Ventilating and Air Conditioning (HVAC) units.

The Industrial Technologies segment posted revenues of $744 million, increasing 8% year over year and 6.7% sequentially on the backs of ameliorated businesses from the Air and Productivity solutions at Europe and the Americas which were partially offset by weakness from the Asian economy.

Revenues from the Residential Solutions segment dropped 13% year over year and 12% sequentially to $443 million in the fourth quarter of 2011.  Bookings declined heavily during the quarter along with several inventory and production reductions made during the quarter.

Finally, the Security Technologies segment recorded sales of $415 million, down 3% year over year and 5.3% sequentially. Revenues across all regions declined significantly with slight improvement in orders from the Americas.

In 2011, net sales amounted to $14.78 billion, rising 6% annually.

Margins

Adjusted operating margin for the fourth quarter of 2011 came in at 9.5% compared to 8.5% in the year-ago quarter and 11.3% in the previous quarter. Inflationary pressures along with an unfavorable product revenue mix could only partially offset the operational excellence achieved during the quarter.

Effective adjusted tax rate came in at 9% in the fourth quarter of 2011 compared to 14% in the year-ago quarter.

In 2011, adjusted operating margin came in for 10.2% compared to 9.0% in 2010. This was primarily on the backs of production efficiencies attained during the year along with benefits of higher pricing sales.

Segment-wise, Climate Solutions’ recorded 10%, Industrial Technologies recorded 14.6%, Residential Solutions registered 3.1% and Security Technologies recorded 20.3% as operating margins for full year 2011.

Share Repurchase

During the quarter, Ingersoll-Rand purchased 19 million shares. In 2011, the company purchased a total of 36 million shares for approximately $1.2 billion.

Balance Sheet and Cash Flows

The company had a cash balance of $1.2 billion at the end of the quarter versus $1.4 billion at the end of the previous quarter. Debt balance amounted to $3.6 billion remaining static over the last quarter.

Cash flow generated during the quarter amounted to $332 million and the available cash flow for 2011 was reported at $944 million.

Outlook

For the first quarter of fiscal 2012, management expects revenues to fall within $2,975 million - $3,075 million with EPS from continuing operations between 20 cents and 26 cents.

In 2012, Ingersoll-Rand projects revenues between $14 billion and $14.4 billion along with EPS targeted at $2.90 – $3.10.  The company is expected to generate cash flows of $1.1 billion by the end of 2012.

The company seems to be going through a rough time in the current scenario which is expected to have long-lasting effects over 2012. Residential Heating, Ventilating and Air Conditioning (HVAC) sales in North America along with its consumer markets seem quite clouded and lack visibility as of now. Moreover, the European fiscal crisis is perceived to strangle yields of the refrigeration markets and the HVAC replacement demands.

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