U.S. GDP growth tapped the best gain in the past four years during the April-June quarter. Solid business and consumer spending, along with growth in exports, helped drive economic growth in the country.
Moving ahead, a robust economic momentum is anticipated to spur infrastructure spending in the United States. Against this backdrop, allocating your hard-earned money in selective industrial stocks will ensure better returns.
Among the numerous potential gainers in the Industrial Products sector, adding Ingersoll-Rand Plc (IR - Free Report) to your portfolio will bear fruit. This stock not only carries a Zacks Rank #2 (Buy), but also flaunts an attractive VGM Score of A.
Reasons for the Solid Run
Revenue Prospects: Ingersoll’s revenues grew 5.1% and 5.9% year over year in 2017 and first-half 2018, respectively. The company’s quarterly top-line performance in second-quarter 2018 came in 11% higher than the year-ago tally and also surpassed the Zacks Consensus Estimate by 3.5%. Ingersoll believes strength in commercial and residential Heating, Ventilation and Air Conditioning (HVAC), transport solutions and rental services businesses will continue to drive its revenue growth trajectory in the near term. Notably, the company raised its organic revenue growth guidance from 3-3.5% to 7-8%.
Per our estimates, Ingersoll’s year-over-year revenue growth will be 9.8% and 4.2% in 2018 and 2019, respectively.
Over the past three months, Ingersoll’s shares have rallied 8.8%, outperforming 2.2% gain recorded by the industry.
Profit Making Prospects: Ingersoll pulled off an average positive earnings surprise of 5.29% over the last four quarters. The company’s adjusted earnings in the June-end quarter came in 24% higher than the year-ago tally and also outpaced the Zacks Consensus Estimate by 7.6%. Ingersoll believes its pricing actions, greater operational efficacy, lower interest expenses and additional share buybacks will drive its bottom-line results in the quarters ahead as well. The company currently anticipates securing earnings of $5.00-$5.50 per share in 2018.
Per our estimates, Ingersoll’s year-over-year earnings growth will be 22.2% and 11.7% in 2018 and 2019, respectively.
Innovation Stand: Ingersoll is also poised to become more competent on the back of stronger innovation. In 2017, the company launched around 70 services and products in the market. These introductions not only fortified Ingersoll’s existing digital capabilities, but have also boosted its overall productivity. The company’s state-of-the-art solutions, like Trane GO and the fresh range CARE service, will likely help secure sturdier market response, going forward.
Acquisition Story: Ingersoll intends to enhance its near-term revenues and profitability on the back of strategic acquisitions. In 2017, the company acquired GPSi Holdings, LLC, CALMAC and Thermocold Construzioni. These buyouts are currently driving Ingersoll’s aggregate revenues. Additionally, the latest acquisition of ICS Cool Energy (January 2018) is currently strengthening the company’s Commercial HVAC business.
Shareholders’ Payback: Ingersoll tries to provide higher value to its shareholders in the form of dividend and share-buyback offers. The company paid nearly $430 million to its shareholders in the form of dividends and deployed around $1 billion to buy back shares last year. Also, in June 2018, Ingersoll provided an 18% increment in quarterly dividend rate and repurchased around $500 millionshares at an average price of $88.53 per share.
Other Stocks to Consider
Some other top-ranked stocks in the Zacks Industrial Products sectorare listed below:
Altra Industrial Motion Corp. (AIMC - Free Report) sports a Zacks Rank of 1. The company pulled off an average positive earnings surprise of 4.01% over the trailing four quarters.
Advanced Emissions Solutions, Inc. carries a Zacks Rank of 2 (Buy). The company delivered an average positive earnings surprise of 16.40% over the preceding four quarters.
Alamo Group, Inc. also holds a Zacks Rank #2. The stock came up with an average positive earnings surprise of 6.06% during the same time frame.
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