Ingersoll-Rand (IR) Q4 Earnings & Revenues Lag, Bookings Dip

Ingersoll-Rand plc (NYSE:IR) reported weaker-than-expected fourth-quarter 2019 results.

Adjusted earnings were $1.40 per share, missing the Zacks Consensus Estimate of $1.42. However, the bottom line grew 6.1% from the year-ago quarter figure of $1.32 on strong revenue growth.

In 2019, Ingersoll-Rand’s adjusted earnings were $6.37 per share, up 14% from $5.61 in 2018.

Segmental Performance Drives Revenues

Ingersoll-Rand’s net sales were $4,151 million in the fourth quarter, reflecting 7% growth from the year-ago quarter. Organic sales grew 5% year over year.

The company’s top line marginally missed the Zacks Consensus Estimate of $4,153 million.

Bookings in the quarter declined 4% year over year to $3,975 million.

The company reports revenues under two market segments. A brief discussion of the quarterly results is provided below:

Climate generated revenues of $3,183.7 million, accounting for roughly 76.7% of net revenues in the reported quarter. Sales grew 6.1% year over year on 7% growth in organic sales. Healthy growth in Commercial heating, ventilation and air conditioning business boosted organic sales.

The segment’s bookings fell 7% year over year (or down 6% organically) to $3,057 million.

Industrial’s revenues totaled $967.2 million, representing 23.3% of net revenues in the quarter. On a year-over-year basis, the segment’s revenues grew 8.2% on gains from solid demand for small electric vehicles, offset by continued weakness in the industrial short cycle markets. Organic revenues were down 2% in the quarter.

The segment’s bookings in the quarter grew 6% year over year (or down 4% organically) to $918 million.

Operating Margin

In the fourth quarter, Ingersoll-Rand’s cost of sales rose 5.8% year over year to $2,904.3 million. Cost of sales was 70% of the quarter’s net sales compared with 70.5% in the year-ago quarter. Selling & administrative expenses rose 16.7% to $821.2 million. It represented 19.8% of net sales in the reported quarter.

Adjusted operating profit grew 7.1% year over year to $501.6 million. Margin grew 10 bps to 12.1%.

Interest expenses rose 29.2% year over year to $63.3 million. Adjusted effective tax rate in the quarter was 20%.

Balance Sheet & Cash Flow

Exiting the fourth quarter, Ingersoll-Rand had cash and cash equivalents of $1,303.6 million, up 44.3% from $903.4 million recorded as on Dec 31, 2018. Long-term debt was $4,922.9 million, up 31.6% on a year-over-year basis.

In 2019, the company generated net cash of $1,956.3 million from continuing operating activities, roughly 32.6% above the 2018 level. Capital expenditure totaled $254.1 million compared with $365.6 million in the previous year. Free cash flow rose 60% to $1,838.7 million.

During 2019, the company distributed $510.1 million as dividend payouts and repurchased shares worth $750.1 million.

Outlook

Earlier, Ingersoll-Rand had announced that its climate company will be known as Trane Technologies plc. This climate company will come into existence in early 2020 after Ingersoll-Rand completes the divestment of its Industrial segment to Gardner Denver Holdings.

For 2020, Ingersoll-Rand anticipates revenues to increase 3-5% year over year for Trane Technologies.

Zacks Rank & Key Picks

Ingersoll-Rand currently carries a Zacks Rank #3(Hold).

Some better-ranked stocks are Cintas Corporation (NASDAQ:CTAS) , Emerson Electric Co. (NYSE:EMR) and Crane Company (NYSE:CR) . All these companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cintas delivered positive earnings surprise of 8.50%, on average, in the trailing four quarters.

Emerson delivered positive earnings surprise of 3.03%, on average, in the trailing four quarters.

Crane’s positive earnings surprise in the last reported quarter was 0.64%.

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