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Why Is Ingersoll (IR) Up 7.6% Since Last Earnings Report?

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It has been about a month since the last earnings report for Ingersoll Rand (IR - Free Report) . Shares have added about 7.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Ingersoll due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Ingersoll Rand Tops Q2 Earnings Estimates, Hikes '21 View

Ingersoll Rand delivered impressive results for second-quarter 2021. Its earnings surpassed estimates by 15% and sales exceeded the same by 7.49%.

Its adjusted quarterly earnings were 46 cents per share, reflecting growth of 58.6% from the year-ago quarter’s 29 cents. The bottom line gained from revenue growth and margin expansion. The bottom line surpassed the Zacks Consensus Estimate of 40 cents.

Revenue Details

In the quarter under review, Ingersoll Rand’s revenues of $1,279.1 million reflected growth of 24.7% from the year-ago quarter’s number. Organic sales in the quarter expanded 16% year over year, while acquisition had a positive 2.6% impact. Movements in foreign currencies had a positive impact of 6.1%.

The company’s revenues surpassed the Zacks Consensus Estimate of $1,190 million.

Orders in the quarter totaled $1,459 million, increasing 47.5% from the year-ago quarter’s number.

The company reports revenues under two segments. A brief discussion of the quarterly results is provided below:

Industrial Technologies & Services generated revenues of $1,047.5 million, reflecting growth of 26.3% from the year-ago quarter. The top line gained from 17% growth in organic sales, positive impact of 6.3% from movements in foreign currencies, and acquisitions contribution of 3%. The segment’s orders in the quarter grew 52.8%.

Precision & Science Technologies’ revenues totaled $231.6 million, suggesting a year-over-year increase of 18.3%. Organic sales grew 11.8%, while movements in foreign currencies contributed 5.3%. Acquisitions had a positive impact of 1.2%. The segment’s orders were up 26.8%.

Margin Profile

Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) in the quarter increased 34.3% year over year to $292.1 million. Also, margins increased 160 basis points (bps) to 22.8%.

On a segmental basis, adjusted EBITDA margin increased 250 bps year over year to 24.7% for Industrial Technologies & Services, and jumped 40 bps to 30.7% for Precision & Science Technologies.

Balance Sheet & Cash Flow

Exiting the second quarter of 2021, Ingersoll Rand had cash and cash equivalents of $3,669.9 million, increasing from $1,639.6 million recorded in the last reported quarter. Long-term debt was stable sequentially at $3,823.3 million.

In the first half of 2021, the company repaid $19.7 million of long-term debts and repurchased shares worth $3.2 million.

Its liquidity of $4.7 billion at the end of the second quarter of 2021 comprised cash of $3.7 billion and credit under revolving facilities of $1 billion.

In the second quarter, it generated net cash of $147.3 million from operating activities, decreasing 25.9% from the year-ago quarter. Capital expenditure totaled $11.6 million versus $15.6 million in the previous year’s comparable quarter. Free cash flow decreased 25.9% to $135.7 million.

Outlook

Ingersoll Rand hiked its projections for 2021. It now anticipates revenue growth in mid-teens (on a year-over-year basis) for the year. The projection represents an improvement from low-double-digit sales growth mentioned earlier. Foreign currency translation is anticipated to boost sales by low-single digits or 3% in 2021, versus 2% mentioned previously. Contribution from mergers/acquisitions is anticipated to be $60 million.

For both the Industrial Technologies & Services and Precision & Science Technologies segments, the company expects organic sales growth in low-double digits as compared with high-single digits stated previously.

Adjusted EBITDA is anticipated to be $1.15-$1.18 billion for the year. The projection reflects an improvement from $1.12-$1.15 billion mentioned earlier. Free cash flow conversion is expected to be in excess of 100%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 74.84% due to these changes.

VGM Scores

Currently, Ingersoll has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Ingersoll has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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