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Ingersoll Rand (IR) Beats on Q2 Earnings, Tweaks View
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Industrial goods manufacturer Ingersoll-Rand Plc (IR - Free Report) reported strong second-quarter 2016 results with net earnings of $747.6 million or $2.86 per share compared with $78.9 million or 29 cents per share in the year-earlier quarter. The stellar year-over-year increase in GAAP earnings was primarily attributable to other income and lower taxes during the reported quarter.
Excluding non-recurring items, adjusted earnings from continuing operations in the reported quarter were $1.38 per share compared with $1.20 in the year-ago quarter. Adjusted earnings from continuing operations beat the Zacks Consensus Estimate by 8 cents.
Quarterly revenues were $3,688 million, up 2% from $3,600 million recorded in the year-ago quarter. Revenues missed the Zacks Consensus Estimate of $3,690 million. Meanwhile, organic revenues improved 3% year over year. While organic revenues from the U.S. increased 4%, the same from international markets rose 3% from the year-ago quarter.
Climate segment recorded sales of $2,935 million in second-quarter 2016 compared with $2,816 million in the year-ago quarter. The upside was driven by mid-single digit percentage increase in commercial HVAC (heating, ventilation and air conditioning) revenues.
Industrial segment posted revenues of $753 million in the reported quarter, down 4% year over year. Organic revenues for compression-related products were down at low single digits, while industrial products fell to the mid teens due to decline in material handling equipment, partially offset by Club Car, which was up slightly due to growth in golf cars, utility vehicle and aftermarket parts.
Margins
Operating margin for the second quarter of 2016 was 13.7% compared with 12.6% in the year-ago quarter. Adjusted operating margin expanded to 13.8% from 13.0% in the prior-year quarter. Adjusted operating margin for the Climate segment was 16.8% in the reported quarter compared with 14.4% in the year-ago quarter. Adjusted operating margin for the Industrial segment was 9.8%, down from 13.3% in the year-ago quarter, due to a decline in volumes and mix and other inflation, partially offset by productivity gains and price realization.
Balance Sheet and Cash Flow
As of Jun 30, 2016, cash and cash equivalents totaled $928.8 million while long-term debt was $3,724.8 million. Net cash from operating activities grossed $419.7 million compared with $170 million in the prior-year quarter. Working capital was 5.6% of revenues at the end of the reported quarter compared with 5.8% in the year-earlier quarter, representing a 20 basis point improvement. Free cash flow in the reported quarter was $348 million, up substantially from $55 million in the year-ago quarter.
During the quarter, Ingersoll sold its remaining shares in Hussmann Parent, Inc. as Panasonic Corporation acquired 100% of Hussmann’s shares for $422 million.
Outlook
For 2016, management expects slow-to-moderate growth in the global construction and retrofit markets, and slow recovery in industrial markets. The company anticipated organic revenue increase of 2–3% year over year while reported revenues are expected to be flat to up 1--2% year over year.
Ingersoll raised the lower end of its adjusted earnings from continuing operations guidance to $4.00 to $4.10 per share from $3.95 to $4.10 projected earlier. Adjusted free cash flow for the year is estimated in the range $1.0--$1.1 billion, up from $950 million to $1 billion projected earlier.
For third-quarter 2016, Ingersoll projects organic revenue growth of around 3%. Adjusted earnings from continuing operations are expected in the range of $1.25 to $1.30 per share, with earnings in the band of $1.24 to $1.29.
Ingersoll currently carries a Zacks Rank #2 (Buy). Other favorably ranked stocks in the industry include Illinois Tool Works Inc. (ITW - Free Report) , Tennant Company (TNC - Free Report) and Holdings PLC (LXFR - Free Report) . Tennant Company sports a Zacks Rank #1 (Strong Buy) while Luxfer and Illinois Tool Works carry the same Zacks Rank as Ingersoll.
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Ingersoll Rand (IR) Beats on Q2 Earnings, Tweaks View
Industrial goods manufacturer Ingersoll-Rand Plc (IR - Free Report) reported strong second-quarter 2016 results with net earnings of $747.6 million or $2.86 per share compared with $78.9 million or 29 cents per share in the year-earlier quarter. The stellar year-over-year increase in GAAP earnings was primarily attributable to other income and lower taxes during the reported quarter.
Excluding non-recurring items, adjusted earnings from continuing operations in the reported quarter were $1.38 per share compared with $1.20 in the year-ago quarter. Adjusted earnings from continuing operations beat the Zacks Consensus Estimate by 8 cents.
Quarterly revenues were $3,688 million, up 2% from $3,600 million recorded in the year-ago quarter. Revenues missed the Zacks Consensus Estimate of $3,690 million. Meanwhile, organic revenues improved 3% year over year. While organic revenues from the U.S. increased 4%, the same from international markets rose 3% from the year-ago quarter.
INGERSOLL RAND Price, Consensus and EPS Surprise
INGERSOLL RAND Price, Consensus and EPS Surprise | INGERSOLL RAND Quote
Segment Performance
Climate segment recorded sales of $2,935 million in second-quarter 2016 compared with $2,816 million in the year-ago quarter. The upside was driven by mid-single digit percentage increase in commercial HVAC (heating, ventilation and air conditioning) revenues.
Industrial segment posted revenues of $753 million in the reported quarter, down 4% year over year. Organic revenues for compression-related products were down at low single digits, while industrial products fell to the mid teens due to decline in material handling equipment, partially offset by Club Car, which was up slightly due to growth in golf cars, utility vehicle and aftermarket parts.
Margins
Operating margin for the second quarter of 2016 was 13.7% compared with 12.6% in the year-ago quarter. Adjusted operating margin expanded to 13.8% from 13.0% in the prior-year quarter. Adjusted operating margin for the Climate segment was 16.8% in the reported quarter compared with 14.4% in the year-ago quarter. Adjusted operating margin for the Industrial segment was 9.8%, down from 13.3% in the year-ago quarter, due to a decline in volumes and mix and other inflation, partially offset by productivity gains and price realization.
Balance Sheet and Cash Flow
As of Jun 30, 2016, cash and cash equivalents totaled $928.8 million while long-term debt was $3,724.8 million. Net cash from operating activities grossed $419.7 million compared with $170 million in the prior-year quarter. Working capital was 5.6% of revenues at the end of the reported quarter compared with 5.8% in the year-earlier quarter, representing a 20 basis point improvement. Free cash flow in the reported quarter was $348 million, up substantially from $55 million in the year-ago quarter.
During the quarter, Ingersoll sold its remaining shares in Hussmann Parent, Inc. as Panasonic Corporation acquired 100% of Hussmann’s shares for $422 million.
Outlook
For 2016, management expects slow-to-moderate growth in the global construction and retrofit markets, and slow recovery in industrial markets. The company anticipated organic revenue increase of 2–3% year over year while reported revenues are expected to be flat to up 1--2% year over year.
Ingersoll raised the lower end of its adjusted earnings from continuing operations guidance to $4.00 to $4.10 per share from $3.95 to $4.10 projected earlier. Adjusted free cash flow for the year is estimated in the range $1.0--$1.1 billion, up from $950 million to $1 billion projected earlier.
For third-quarter 2016, Ingersoll projects organic revenue growth of around 3%. Adjusted earnings from continuing operations are expected in the range of $1.25 to $1.30 per share, with earnings in the band of $1.24 to $1.29.
Ingersoll currently carries a Zacks Rank #2 (Buy). Other favorably ranked stocks in the industry include Illinois Tool Works Inc. (ITW - Free Report) , Tennant Company (TNC - Free Report) and Holdings PLC (LXFR - Free Report) . Tennant Company sports a Zacks Rank #1 (Strong Buy) while Luxfer and Illinois Tool Works carry the same Zacks Rank as Ingersoll.
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