Back to top

Image: Bigstock

Ingersoll Rand (IR) Tops Q3 Earnings Estimates, Hikes '21 View

Read MoreHide Full Article

Ingersoll Rand Inc. (IR - Free Report) reported impressive third-quarter 2021 results. Its earnings surpassed estimates by 23.91% and sales exceeded the same by 3.61%. This was the company’s sixth consecutive quarter of better-than-expected results.

Its adjusted quarterly earnings were 57 cents per share, reflecting growth of 42.5% from the year-ago quarter’s 40 cents. The bottom line surpassed the Zacks Consensus Estimate of 46 cents.

Revenue Details

In the quarter under review, Ingersoll Rand’s revenues of $1,325 million reflected a decline of 0.8% from the year-ago quarter’s number. The decline was primarily attributable to the adverse impact on sales from the divestment of its Specialty Vehicle Technologies (June 2021) and High Pressure Solutions (April 2021) businesses.

However, organic revenues in the quarter expanded 13.4% year over year while acquisition had a positive 3.6% impact. Movements in foreign currencies had a positive impact of 2.1%.

The company’s revenues surpassed the Zacks Consensus Estimate of $1,274 million.

Orders in the quarter totaled $1,498 million, increasing 30% on an organic basis from the year-ago quarter’s number.

It is worth noting here that the divested businesses of Specialty Vehicle Technologies and High Pressure Solutions have been classified as discontinued operations, beginning second-quarter 2021.

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

Industrial Technologies & Services generated revenues of $1,070.7 million, accounting for 80.8% of net revenues in the reported quarter. Sales increased 18.6% year over year on 14.2% growth in organic sales. Movements in foreign currencies had a positive impact of 2.3% and acquisitions contributed 2.1%. The segment’s orders in the quarter grew 36.5%.

Precision & Science Technologies’ revenues totaled $254.3 million, representing 19.2% of net revenues in the third quarter. On a year-over-year basis, the segment’s revenues increased 21.2%. Organic sales grew 9.8% while movements in foreign currencies contributed 1.6%. Acquisitions had a positive impact of 9.8%. The segment’s orders were up 37%.

Ingersoll Rand Inc. Price, Consensus and EPS Surprise

Ingersoll Rand Inc. Price, Consensus and EPS Surprise

Ingersoll Rand Inc. price-consensus-eps-surprise-chart | Ingersoll Rand Inc. Quote

Margin Profile

Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) in the quarter increased 25% year over year to $314 million. Also, margins increased 110 basis points (bps) to 23.7%.

On a segmental basis, adjusted EBITDA margin increased 150 bps year over year to 25.5% for the Industrial Technologies & Services but contracted 100 bps to 29.7% for the Precision & Science Technologies.

Balance Sheet & Cash Flow

Exiting the third quarter of 2021, Ingersoll Rand had cash and cash equivalents of $2,033 million, decreasing from $3,669.9 million recorded in the last reported quarter. Long-term debt was $3,422.2 million, down 10.5% sequentially.

In the first nine months of 2021, the company repaid $425.7 million of long-term debts and repurchased shares worth $736.5 million.

Its liquidity of $3.1 billion at the end of the third quarter comprised cash of $2 billion and credit under revolving facilities of $1 billion.

In the third quarter, it generated net cash of $146.1 million from operating activities, decreasing 24.7% from the year-ago quarter. Capital expenditure totaled $15.3 million compared with $6.4 million in the previous-year quarter. Free cash flow decreased 30.2% to $130.8 million.

Buyouts

In September 2021, Ingersoll Rand completed the acquisition of Bottrop, Germany-based Seepex GmbH for €431.5 million in cash. Also, in August 2021, the company acquired Montreal, Canada-based Maximus for CAD$135.4 million.

Outlook

Ingersoll Rand hiked its projections for 2021. It now anticipates revenue growth in the high-teens (on a year-over-year basis) for the year. The projection represents an improvement from the mid-teens-range sales growth mentioned earlier. Foreign currency translation is anticipated to boost sales by the low-single digits or 3% in 2021, in line with its previous guidance. Contribution from mergers/acquisitions is anticipated to be $135 million, up from $60 million anticipated earlier.

For both the Industrial Technologies & Services and the Precision & Science Technologies segments, the company expects organic sales growth in the low-double digits, in line with its previous projection.
    
Adjusted EBITDA is anticipated to be $1.175-$1.195 billion for the year. The projection reflects an improvement from $1.15-$1.18 billion mentioned earlier. Free cash flow conversion is expected to be more than 100%.

Zacks Rank & Stocks to Consider

The company currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the Zacks Industrial Products sector are A. O. Smith Corporation (AOS - Free Report) , AZZ Inc. (AZZ - Free Report) , and Applied Industrial Technologies, Inc. (AIT - Free Report) . While A. O. Smith currently sports a Zacks Rank #1 (Strong Buy), AZZ and Applied Industrial carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

A. O. Smith delivered an earnings surprise of 16.82%, on average, in the trailing four quarters.

AZZ delivered an earnings surprise of 25.47%, on average, in the trailing four quarters.

Applied Industrial delivered an earnings surprise of 26.71%, on average, in the trailing four quarters.

Published in