It has been about a month since the last earnings report for Ingersoll Rand (IR Quick QuoteIR - Free Report) . Shares have added about 26.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Ingersoll due for a pullback? 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 Q1 Earnings Miss Estimates, Fall Y/Y

Ingersoll Rand reported weaker-than-expected results for the first quarter of 2020, with earnings lagging estimates by 12.9%.

Its adjusted earnings in the quarter under review were 27 cents per share, reflecting a year-over-year decline of 28.9% and lagging the Zacks Consensus Estimate of 31 cents.

For comparison purpose, the company provided supplemental data, assuming the merger of Gardner Denver Holdings and the Industrial segment of Ingersoll-Rand was completed in January 2018.

Its adjusted earnings (supplemental) were 25 cents per share, reflecting decline of 32.4% from the year-ago quarter figure of 37 cents.

Revenue Details

Ingersoll Rand’s net sales were $799.9 million in the first quarter, reflecting a 29% increase from the year-ago quarter. The Zacks Consensus Estimate for the quarter was $1,310 million.

However, the company’s supplemental adjusted revenues were $1,269.8 million in the first quarter, reflecting a 15.3% decline from the year-ago quarter. Organic sales in the quarter declined 14% year over year, while acquisition had a positive 0.1% impact. However, unfavorable movements in foreign currencies had an adverse impact of 1.4%.

Adjusted orders (supplemental) in the quarter decreased 8.3% year over year to $1,404.5 million.

The company reports revenues under four market segments. A brief discussion of the quarterly results (supplemental) is provided below:

The Industrial Technologies & Services segment generated revenues of $795.8 million, accounting for 62.7% of net revenues in the reported quarter. Sales decreased 18.5% year over year on a 16.9% fall in organic sales. Forex woes had an adverse 1.7% impact on sales and acquisitions had a 0.1% positive impact. The segment’s adjusted orders in the quarter decreased 11.3% year over year to $889.4 million.

Precision & Science Technologies’ revenues totaled $192.2 million, representing 15.1% of net revenues in the quarter under review. On a year-over-year basis, the segment’s revenues decreased 10% on an organic sales decline of 8.9% and forex woes of 1.4%. Acquisitions had a positive impact of 0.3%. The segment’s adjusted orders were flat year over year at $218.3 million.

The Specialty Vehicle Technologies segment generated revenues of $185.4 million, accounting for 14.6% of net revenues in the reported quarter. Sales increased 6.6% year over year on 7% growth in organic sales, partially offset by forex woes of 0.4%. The segment’s adjusted orders in the quarter increased 7.9% year over year to $213.3 million.

High Pressure Solutions’ revenues totaled $96.4 million, representing 7.6% of net revenues in the quarter under review. On a year-over-year basis, the segment’s revenues decreased 29.1% on a fall in organic sales of 28.6% and forex woes of 0.4%. The segment’s adjusted orders were down 25.8% year over year at $83.5 million.

Margin Profile

Supplemental adjusted earnings before interest, tax, depreciation and amortization (EBITDA) in the quarter decreased 24.4% year over year to $208.1 million. Margins, also, plummeted 200 basis points (bps) to 16.4%.

On a segmental basis, supplemental adjusted EBITDA margin decreased 150 bps year over year for Industrial Technologies & Services, while increased 120 bps to 27.7% for Precision & Science Technologies. However, margin for Specialty Vehicle Technologies segment decreased 80 bps year over year and plummeted 620 bps for High Pressure Solutions.

Balance Sheet & Cash Flow

Exiting the first quarter of 2020, Ingersoll Rand had cash and cash equivalents of $555.7 million, up 9.9% from $505.5 million recorded in the last reported quarter. Long-term debt surged 113.7% sequentially to $3,427.1 million.

During the quarter, the company repaid $1,591 million of its long-term debts, while also secured $1,586 million as proceeds from these debts.

In the first quarter of 2020, the company generated net cash of $68.4 million from operating activities, decreasing 0.6% year over year. Capital expenditure totaled $8.3 million versus $14.1 million in the previous year’s comparable quarter. Free cash flow rose 9.9% year over year to $60.1 million.

Outlook

The company noted that the safety of workers and customers remain top priorities in the present difficult environment. Also, it expects to deliver $80-$90 million of savings from the accelerated synergy actions related to the business combination of Ingersoll-Rand’s Industrial segment with Gardner Denver. This savings is part of $250 million savings expected from the transaction in the first three years of the completion.

The company has refrained from providing projections for 2020 due to the uncertainties related to the coronavirus outbreak.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted 46.15% due to these changes.

VGM Scores

Currently, Ingersoll has a subpar Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. 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 #2 (Buy). We expect an above average return from the stock in the next few months.