Ingersoll (IR) Hits 52-Week High On Improved Q3 Results

Shares of industrial goods manufacturer Ingersoll-Rand Plc (NYSE:IR) scaled a new 52-week high of $69.37 on Nov 4, before closing the trading session a notch lower at $68.75 for a healthy year-to-date return of 24.3%. Despite the price rise, this Zacks Rank #3 (Hold) stock still has enough fundamental strength for further appreciation. The stock is currently trading at a forward P/E of 16.4x and has long-term earnings growth expectation of 9.7%.

Growth Drivers

Ingersoll registered solid third-quarter 2016 results with net earnings of $377.4 million or $1.44 per share compared with $300.9 million or $1.12 per share in the year-earlier quarter. The year-over-year increase in GAAP earnings was primarily attributable to higher revenues during the reported quarter.

Excluding non-recurring items, adjusted earnings from continuing operations in the reported quarter were $1.41 per share compared with $1.21 in the year-ago quarter. Adjusted earnings from continuing operations beat the Zacks Consensus Estimate by 12 cents.

Quarterly revenues were $3,567.8 million, up 2% from $3,486.9 million recorded in the year-ago quarter. Revenues beat the Zacks Consensus Estimate of $3,552 million. Organic revenues improved 3% year over year.

Based on healthy third-quarter results, Ingersoll further raised its adjusted earnings from continuing operations guidance to $4.17–$4.22 per share from the earlier expectation of $4.00–$4.10. Adjusted free cash flow for the year is estimated to be approximately $1.3 billion, up from $1.0–$1.1 billion projected earlier.

Ingersoll continues to focus on improving the efficiencies and capabilities of products and services within its core businesses. The company also has a solid foundation of global brands and leading market share in all major product lines. The geographic and industry diversity coupled with a large installed product base provides ample growth opportunities within service, spare parts and replacement revenue streams. Additionally, the company’s complementary portfolio of products and services is likely to assist it in strengthening the market position and achieving high productivity.

In order to further improve its growth curve, Ingersoll is concentrating on its strategic priorities. These include a disciplined capital allocation, strong and flexible balance sheet position, and cash flows enhancement to support dividend growth. The structural changes in the company are further expected to unlock additional value. We believe that such moves along with its robust operating platform and an efficient management team will help in the execution of these strategic priorities and drive net asset value and dividend growth in the future as well.

Other Stocks to Consider

Some better-ranked stocks in the industry include Applied Industrial Technologies, Inc. (NYSE:AIT) , Crane Co. (NYSE:CR) and Danaher Corp. (NYSE:DHR) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Applied Industrial has a long-term earnings growth expectation of 12% and is currently trading at a forward P/E of 19.1x.

Crane has a long-term earnings growth expectation of 8.7% and is currently trading at a forward P/E of 15.9x.

Danaher has a long-term earnings growth expectation of 11.75% and is currently trading at a forward P/E of 21.4x.

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