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Ingersoll Beats on Adjusted EPS, Revs

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Ingersoll-Rand Plc (IR - Free Report) reported third quarter net income of $165.9 million or 56 cents per share compared with $321.6 million or $1.03 in the year-earlier quarter.

Adjusted EPS from continuing operations stood at $1.16 in the reported quarter, which increased from $1.08 in the year-ago quarter and beat the Zacks Consensus Estimate by 6 cents.

Quarterly revenues of $3,749 million beat the Zacks Consensus Estimate of $3,727 million and rose 4% year over year. Revenues from the U.S. were up 5%, while revenues from the International segment were up 3%.

Segment Performance

Climate Solutions delivered sales of approximately $2.0 billion in the third quarter, up 4% year over year. The year-over-year increase was driven by slight increase in commercial HVAC revenues in Americas, Europe and Asia and slight increase in revenues from parts, services and solutions. Revenues from the Thermo King sub-segment also increased by high-single digit percentage.

The Industrial Technologies segment posted revenues of $722 million in the third quarter, up 3% year over year. Air and productivity revenues increased slightly in the reported quarter as volume declines in the Americas were offset by gains in Europe.

Residential Solutions segment posted a solid 9% year-over-year increase in revenues to $609 million. The increase in revenues was driven by the new residential builder market and customers in the United States and from increased sales to South American customers.

The Security Technologies segment recorded sales of $392 million, flat year over year. However, after adjusting the impact of product line transfer to the Residential Solutions, revenues were up 5%.  


Operating margin for the third quarter of 2013 was 10.0% compared with 12.5% in the year-ago quarter. Adjusted operating margin stood at 14.0%, up 1.4% year over. The year-over-year adjusted margin improvement was driven by increased volume, productivity initiatives and improved pricing, partially offset by inflation and an increase in investment spending.

Balance Sheet and Cash Flows

As of Sep 2013, cash and cash equivalents aggregated $1.1 billion. Long-term debt stood at $3,154.1 million.

Net cash from operating activities for nine months ended Sep 2013 came in at $951.1 million compared with $735.5 million in the prior year.

Capital expenditure for the nine months ended Sep 2013 increased to $187.6 million compared with $170.9 million in the preceding year.

Share Repurchase

The company repurchased approximately 5 million shares for approximately $320 million in the reported quarter as part of a share repurchase program worth $2 billion. The company expects to complete this program by the end of the first quarter of 2014.

Update on Spinoff

In Dec 2012, Ingersoll approved a plan to spin off its commercial and residential security businesses. The company expects the divestiture to be completed prior to 2013 end. The new security company is an Irish plc named Allegion, which will trade on the New York Stock Exchange under the ticker ALLE.

Reaffirms Outlook

For fourth quarter 2013, Ingersoll projects revenues to be between $3.5 billion and $3.6 billion. Adjusted EPS from continuing operations is targeted to be in the range of 85 cents to 90 cents, with reported EPS to be in the range of 45 cents to 50 cents.

For full year 2013, management expects revenues to be in the range of $14.3 billion to $14.4 billion, with adjusted EPS from continuing operations between $3.55 and $3.60.  Reported EPS is expected to be in the range of $2.34-$2.39.

The available cash flow is expected to be $1.1 billion by the end of 2013.

Ingersoll-Rand currently has a Zacks Rank #2 (Buy). Other stocks that look promising and are worth a look in the industry include Manitex International, Inc. (MNTX - Free Report) , carrying a Zacks Rank #1 (Strong Buy), and Colfax Corp. (CFX - Free Report) and Dover Corp.  (DOV - Free Report) , both carrying a Zacks Rank #2 (Buy).

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