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Ingersoll (IR) Down 1.9% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Ingersoll Rand (IR - Free Report) . Shares have lost about 1.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Ingersoll due for a breakout? 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 drivers.

Ingersoll Rand Q4 Earnings Top Estimates, Revenues Miss

Ingersoll Rand reported mixed fourth-quarter 2021 results, wherein earnings surpassed estimates by 11.5%, but sales lagged the same by 0.1%.

Its adjusted quarterly earnings were 68 cents per share, reflecting growth of 28.3% from the year-ago quarter’s 53 cents. The bottom line surpassed the Zacks Consensus Estimate of 61 cents.

In 2021, the company’s earnings came in at $2.09, an increase of 56% on a year-over-year basis.

Revenue Details

In the quarter under review, Ingersoll Rand’s revenues of $1,418.8 million reflected growth of 16.4% from the year-ago quarter’s number. The increase was primarily attributable to organic revenue growth of 11.3%, positive impact of 6.3% from acquisitions, partially offset by the adverse impact of 1.2% from movements in foreign currencies.

The company’s revenues missed the Zacks Consensus Estimate of $1,421 million.

Orders in the quarter totaled $1,507 million, increasing 24% 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 $1,129 million, accounting for 79.6% of net revenues in the reported quarter. Sales increased 11.6% year over year on 10.6% growth in organic sales. Acquisitions contributed 2.1%, while movements in foreign currencies had a negative impact of 1.1%. The segment’s orders in the quarter grew 20.5%.

Precision & Science Technologies’ revenues totaled $289.8 million, representing 20.4% of net revenues in the quarter. On a year-over-year basis, the segment’s revenues increased 40.3%. Organic sales grew 15%. Acquisitions had a positive impact of 26.8%, while movements in foreign currencies had a negative impact of 1.5%. The segment’s orders were up 38.9%.

In 2021, the company’s revenues came in at $5,152.4 million.

Margin Profile

Adjusted earnings before interest, tax, depreciation and amortization (EBITDA) in the quarter increased 15.1% year over year to $342 million. Margins decreased 20 basis points (bps) to 24.1%.

On a segmental basis, adjusted EBITDA margin decreased 40 bps year over year to 25.7% for the Industrial Technologies & Services and contracted 400 bps to 26.8% for the Precision & Science Technologies.

Balance Sheet & Cash Flow

Exiting the fourth quarter of 2021, Ingersoll Rand had cash and cash equivalents of $2,109.6 million, increasing from $2,033 million recorded in the last reported quarter. Long-term debt was $3,401.8 million, down 0.6% sequentially.

In 2021, the company repaid $435.7 million of long-term debts and repurchased shares worth $736.8 million.

Its liquidity of $3.2 billion at the end of the fourth quarter comprised cash of $2.1 billion and credit under revolving facilities of $1.1 billion.

In 2021, it generated net cash of $627.8 million from operating activities, decreasing 3.9% from 2020. Capital expenditure totaled $64.1 million compared with $42 million in the previous year. Free cash flow decreased 7.8% to $563.7 million.

Outlook

Ingersoll Rand offered its projections for 2022. It now anticipates year-over-year revenue growth of 11-13% (7-9% on an organic basis) for the year. Foreign currency translation is anticipated to hurt sales by 1% in 2022. Contribution from mergers/acquisitions is anticipated to be $225 million.

For the Industrial Technologies & Services segment, the company expects sales growth of 7-9%, while the same for the Precision & Science Technologies is anticipated to be 8-10%.
    
Adjusted EBITDA is anticipated to be $1.375-$1.415 billion for the year.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

At this time, Ingersoll has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Ingersoll has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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