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Ingersoll Rand (IR) Gains 13% YTD: Will the Momentum Last?

Shares of Ingersoll Rand IR have gained approximately 13% in the year-to-date period, outperforming the industry’s 3% increase. The upside can be linked to solid underlying demand and benefits from successive acquisitions.

Zacks Investment Research
Zacks Investment Research


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Catalysts Behind the Increase in Share Price

Solid product portfolio, innovation capabilities and focus on boosting aftermarket businesses are driving this Zacks Rank #1 (Strong Buy) company’s growth. Solid demand and higher orders across the product portfolio of compressors and power tools and lifting are aiding the Industrial Technologies & Services segment. For 2023, the company expects segmental revenues to increase 6-8% organically.
 
Ingersoll Rand’s Precision & Science Technologies segment is benefiting from pricing actions and acquired assets. Acquisitions had a positive impact of 2.4% on the unit’s revenues in the first quarter of 2023. The company anticipates Precision & Science Technologies revenues to climb 5-7% organically in 2023.

With underlying demand remaining solid despite market uncertainties, Ingersoll Rand has raised its full-year guidance. For 2023, IR expects total revenues to increase 10-12% compared with a rise of 7-9% predicted earlier. Organic revenues are estimated to increase 6-8% compared with 3-5% increase expected earlier.

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Adjusted earnings are anticipated to be $2.64-$2.74 per share for 2023. This indicates an increase of 11-16% year over year.  The company expected adjusted earnings of $2.48-$2.58 per share earlier.

Ingersoll Rand’s measures to expand market presence, solidify customer base and enhance product offerings through acquisitions hold promise. In first-quarter 2023, acquisitions contributed 5.8% to total revenues. In January 2023, the company completed the acquisition of SPX FLOW’s Air Treatment business, boosting its core compressor product offering through a complementary product portfolio of energy-efficient compressed air dryers, filters and other consumables. The Air Treatment business is a part of IR’s Industrial Technologies and Services (IT&S) segment.

The acquisition of Dosatron International (October 2022) expanded Ingersoll Rand’s digital technology portfolio, opening up opportunities in hydroponics, horticulture, animal health, food safety and sanitation, along with water treatment end markets, where Dosatron had a strong presence. The company is a part of Ingersoll Rand’s Precision and Science Technologies (PST) segment. The acquisition of Westwood Technical Limited (September 2022) expanded its PST segment’s IIoT (industrial internet of things) offerings with Westwood Technical’s Aircom product line. Its acquisition of Houdstermaatschappij Jorc (February 2022) has expanded the IT&S segment’s product offerings. For 2023, Ingersoll Rand anticipates buyouts/mergers to contribute $270 million to total revenues.

Ingersoll Rand’s commitment to reward shareholders through dividend payments and share buybacks also drove its shares higher. In 2022, the company returned $294 million to shareholders through dividends and share buybacks. In the first quarter of 2023, the company returned $85 million to shareholders through $77 million in share repurchases and $8 million in dividends. Strong free cash flow generation supports the company’s shareholder-friendly activities. In 2022, free cash flow increased 36.7% year over year to $770.8 million. In the first quarter of 2023, free cash flow of $148 million jumped more than 350% year over year.

Will the Momentum Continue?

Ingersoll Rand is likely to benefit from improving supply chains in 2023. While the manufacturing sector remains weak, the recent uptick in manufacturing activities signals improvement in demand across several end markets. This augurs well for IR. The acquisition of SPX FLOW’s Air Treatment business is expected to boost the IR’s top line in 2023.

Other Key Picks

Some other top-ranked companies within the broader Industrial Products sector are as follows:

Flowserve FLS currently sports a Zacks Rank #1. The company pulled off a trailing four-quarter earnings surprise of 2.5%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

Flowserve has an estimated earnings growth rate of 64.5% for the current year. The stock has gained 7.2% in a year.

Graco Inc. GGG presently sports a Zacks Rank #1 at present. The company pulled off a trailing four-quarter earnings surprise of 7.9%, on average.

Graco has an estimated earnings growth rate of 16.3% for the current year. The stock has gained 21.4% in a year.

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Ingersoll Rand Inc. (IR) : Free Stock Analysis Report

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