Ingersoll Rand Inc. (IR Quick QuoteIR - Free Report) reported second-quarter 2023 adjusted earnings of 65 cents per share, which beat the Zacks Consensus Estimate of earnings of 54 cents per share. The bottom line increased 30% year over year.

Total revenues of $1,686.5 million outperformed the consensus estimate of $1,581 million. The top line increased 17.1% year over year on a 12.4% rise in organic revenues. Acquisitions contributed 5.9% to revenues while foreign currency movements had an adverse impact of 1.2%.

Orders in the quarter totaled $1,737.4 million, up 8.7% from the year-ago quarter. Organically orders increased 4.6%.

Segmental Discussion

The Industrial Technologies & Services segment generated revenues of $1,378.4 million, accounting for 81.7% of net revenues in the reported quarter. Sales increased 19.8% year over year on 14.4% growth in organic sales. Acquisitions contributed 6.8% while movement in foreign currencies had a negative impact of 1.4%. The segment’s orders in the quarter were up 12.8% (up 8.2% organically). Adjusted EBITDA increased 29.3% year over year to $377.5 million. Our estimate for adjusted EBITDA was $319.3 million.

The Precision & Science Technologies segment’s revenues totaled $308.1 million, representing 18.3% of net revenues in the quarter. Our estimate for segmental revenues was $298.5 million. On a year-over-year basis, the segment’s revenues increased 6.5%. Organic sales grew 4.6%. Acquisitions had a positive impact of 2.5% while movement in foreign currencies had a negative impact of 0.6%. The segment’s orders were down 7.9% (down 10.2% organically). Adjusted EBITDA increased 15.8% year over year to $90.0 million. Our estimate for adjusted EBITDA was $88.9 million.

Margin Profile

In the quarter under review, IR's cost of sales increased 13.4% year over year to $989.0 million. Selling and administrative expenses increased 14.5% to $315.6 million.

Adjusted EBITDA in the quarter increased 26.5% year over year to $467.5 million. The margin increased to 27.7% from 25.7% in the year-ago period.

On a segmental basis, the adjusted EBITDA margin increased 200 basis points (bps) year over year to 27.4% for the Industrial Technologies & Services segment. The same increased 240 bps to 29.2% for the Precision & Science Technologies segment.

Balance Sheet & Cash Flow

While exiting the second quarter of 2023, Ingersoll Rand had cash and cash equivalents of $1,178.1 million, compared with $1,613.0 million recorded at the end of December 2022. Long-term debt (less of current maturities) was $2,698.5 million, compared with $2,716.1 million in December 2022.
 
In the first six months of 2023, this Zacks Rank #3 (Hold) company paid out dividends of $16.2 million and repurchased treasury stocks worth $132.8 million in the same time period.

In the same time period, IR generated net cash of $398.7 million from operating activities, up 68.8% year over year. Capital expenditure totaled $47.2 million, compared with $39.3 million in the year-ago quarter. Free cash flow increased 78.5% to $351.5 million.

2023 Outlook Revised

The company has raised its outlook for 2023. Ingersoll Rand now expects revenues to increase 12-14%, compared with 10-12% predicted earlier. Organic revenues are estimated to increase 8-10%, compared with 6-8% predicted before. The Industrial Technologies & Services segment’s revenues are predicted to increase 9-11% organically, compared with 6-8% expected earlier. The Precision & Science Technologies segment’s revenues are forecasted to climb 5-7% organically. Adverse foreign currency movements are expected to have no impact on total revenues.
 
Adjusted EBITDA is expected to be $1,690-$1,740 million, indicating an increase of 18-21% year over year, compared with $1,660-$1,710 million expected earlier. Adjusted earnings are anticipated to be $2.70-$2.80 per share, indicating an increase of 14-19% year over year. The midpoint of the guided range — $2.75 — lies above the Zacks Consensus Estimate of adjusted earnings of $2.70 per share. The company expected adjusted earnings of $2.64-$2.74 per share earlier.

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