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Here's Why You Should Buy Ingersoll-Rand (IR) Stock Now

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The Institute for Supply Management’s (ISM) manufacturing gauge was pegged at 59.3% this November, marking the 115th consecutive month of overall economic expansion. An above-50 ISM Index indicates growth in American manufacturing. The manufacturing companies have been buoyed by sturdy domestic economic conditions, of late. The December 2017-enacted corporate tax overhaul and the President’s impetus to streamline business regulations, have aided in escalating spending among most of these companies.

Against this backdrop, allocating your hard-earned money in selective manufacturing industrial stocks will ensure better returns. Among the numerous potential gainers within the space, adding Ingersoll-Rand Plc (IR - Free Report) to your portfolio will bear fruit. This stock currently carries a favorable Zacks Rank #2 (Buy).

Reasons for the Bull Run

Profitability: Ingersoll pulled off a positive average earnings surprise of 5.55% in the past four quarters. The company believes robust sales volume, increased productivity and pricing actions will continue to boost its profitability in the upcoming quarters. Notably, new investments made toward footprint-optimization initiatives are expected to trim costs and expand the company’s near-term margins. Notably, Ingersoll currently anticipates earnings of $5.55-$5.60 per share in 2018, higher than the prior view of $5.00-$5.50 per share. Per our estimates, the company’s year-over-year earnings growth is currently pegged at 23.7% and 13.1% for 2018 and 2019, respectively. Additionally, Ingersoll’s earnings per share are predicted to be up nearly 12% in the next three to five years.

Solid Top-Line Prospects:Strength in the Transport Solutions, Industrial Fluid Management and Material Handling businesses will likely boost Ingersoll's top-line results in the upcoming quarters. Moreover, rising demand from heating, ventilation, and air conditioning (HVAC) markets will likely support the upside. Ingersoll currently anticipates generating organic revenue growth of 7-8% in 2018, higher than the previous view of 3-3.5%. Per our estimates, the company’s year-over-year revenue growth is currently pegged at 9.9% and 5% for 2018 and 2019, respectively.

Inorganic Stance:Ingersoll intends to boost its near-term revenues and profitability on the back of acquisitions & mergers. In the first nine months of 2018, the company has invested nearly $280 million for mergers & acquisitions. In this context, the buyout of ICS Cool Energy (January 2018) and Trane Mitsubishi joint venture (inked in January 2018) are worth mentioning. Since acquired, both the assets have been strengthening Ingersoll’s competency.

Beneficial to Shareholders: Ingersoll tries to provide higher value to its shareholders in the form of dividend and share-buyback offers. So far in 2018, the company has returned roughly $850 million cash to its shareholders through share buybacks and dividends. Moreover, this October, Ingersoll rolled out a share-repurchase program through which it plans to buy nearly $1.5 billion worth common stock.

Price Performance: Over thepast two years, Ingersoll’s shares have gained 16.7%, outperforming 5.1% returns yielded by its industry and 8.7% growth recorded by the benchmark S&P 500 index.

Other Stocks to Consider

Some other top-ranked stocks in the same space are listed below:

DXP Enterprises, Inc. (DXPE - Free Report) sports a Zacks Rank #1 (Strong Buy). The company pulled off a positive average earnings surprise of 112.62% in the past four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.

Luxfer Holdings PLC (LXFR - Free Report) also carries a Zacks Rank of 1. The company delivered a positive average earnings surprise of 24.27% in the trailing four quarters.

Applied Industrial Technologies, Inc. (AIT - Free Report) holds a Zacks Rank of 2. The company generated a positive average earnings surprise of 11.67% in the last four quarters.

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