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Ingersoll Rand Inc. (IR - Free Report) is set to gain from a healthy demand environment and innovation capabilities. The company continues to see higher orders across its product portfolio of industrial vacuums and blowers along with stable orders for compressors, which will drive the Industrial Technologies & Services segment. Growth in short-cycle orders, along with strong book-and-ship orders, is likely to be a tailwind for the Precision and Science Technologies segment. The company remains positive about the underlying health of the segment with stabilizing organic order growth.
Ingersoll Rand believes in expanding its market presence, solidifying its customer base and enhancing product offerings through acquisitions. In second-quarter 2024, acquisitions contributed 5.7% to total revenues. In June 2024, Ingersoll Rand acquired ILC Dover, integrating it into its Precision & Science Technologies segment. This acquisition will enhance IR’s capabilities with ILC Dover’s single-use solutions for biopharma and pharma production, complementing its expertise in liquid handling technologies and positive displacement pumps.
In the same month, the company acquired Complete Air and Power Solutions (“CAPS”), Del PD Pumps & Gear Pvt Ltd. (Del Pumps) and Fruvac Ltd. (Fruitland Manufacturing). The acquisition of Del Pumps will complement IR’s expertise in mission-critical pumping solutions across life science, food and beverage and medical industries. The buyout will augment the precision technologies business within the Precision and Science Technologies segment.
With the CAPS buyout, IR will be able to expand its product portfolio for its clients while the acquisition of Fruitland will augment its capabilities in the mobile vacuum market. Both companies will be integrated into the Industrial Technologies and Services segment.
The acquisition of Friulair (February 2024) will increase the scale of Ingersoll Rand’s air dryer business and will add new chiller production capabilities, thereby boosting its Industrial Technologies and Services segment. The buyout will enhance the company’s presence across food and beverage, and pharmaceutical end markets. In October 2023, the company acquired Slovakia-based Oxywise s.r.o. and Canada-based Fraserwoods Fabrication and Machining Ltd., boosting its capabilities in high-growth sustainability end markets. Both entities have been added to the Industrial Technologies and Services segment.
Ingersoll Rand’s commitment to rewarding shareholders through dividend payments and share buybacks is encouraging. In 2023, the company paid dividends of $32.4 million and repurchased shares worth $263 million. In the first six months of 2024, it paid out dividends of $16.1 million and repurchased treasury stocks worth $135.5 million. In April 2024, Ingersoll Rand’s board of directors approved an additional $1 billion increase to the share repurchase authorization. This is incremental to the amount remaining on the existing $750 million authorization.
Strong free cash flow generation supports the company’s shareholder-friendly activities. In 2023, free cash flow jumped 65% year over year to $1.3 billion. In the first six months of 2024, free cash flow increased 8.8% year over year to $382.4 million.
In the past year, this Zacks Rank #3 (Hold) company’s shares have gained 26% compared with the industry’s 17.9% growth.
Image Source: Zacks Investment Research
However, cost inflation is weighing on Ingersoll Rand’s operations. The company’s cost of sales increased 11.2% year over year in 2023 due to the rising cost of raw materials and component parts. Selling and administrative expenses rose 16.1% in 2023. Also, in the second quarter, selling and administrative expenses increased 8.4%. This drove selling and administrative expenses as a percentage of revenues by 20 basis points to 18.9%.
The company has been witnessing high costs associated with investments in areas like demand generation and digital and other IT-related investments. It expects to incur corporate costs of $170 million in 2024. Escalating costs are a pressure on the bottom line.
Ingersoll Rand has considerable exposure to regions outside the United States. Its significant international presence exposes it to political and economic disruptions, which can directly affect its profits. Also, the company is exposed to headwinds arising from unfavorable movement in foreign currencies. In 2023 and second-quarter 2024, adverse foreign currency movements hurt sales by approximately 1% and 0.9%, respectively.
FLS delivered a trailing four-quarter average earnings surprise of 18.2%. In the past 60 days, the Zacks Consensus Estimate for Flowserve’s 2024 earnings has increased 3.8%.
Crane Company (CR - Free Report) presently carries a Zacks Rank of 2. The company delivered a trailing four-quarter average earnings surprise of 11.2%.
In the past 60 days, the Zacks Consensus Estimate for CR’s 2024 earnings has increased 2%.
Ferguson Enterprises Inc. (FERG - Free Report) currently carries a Zacks Rank of 2. FERG delivered a trailing four-quarter average earnings surprise of 2.6%.
In the past 60 days, the consensus estimate for Ferguson’s fiscal 2025 earnings has remained steady.
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Ingersoll Rand Exhibits Strong Prospects Despite Headwinds
Ingersoll Rand Inc. (IR - Free Report) is set to gain from a healthy demand environment and innovation capabilities. The company continues to see higher orders across its product portfolio of industrial vacuums and blowers along with stable orders for compressors, which will drive the Industrial Technologies & Services segment. Growth in short-cycle orders, along with strong book-and-ship orders, is likely to be a tailwind for the Precision and Science Technologies segment. The company remains positive about the underlying health of the segment with stabilizing organic order growth.
Ingersoll Rand believes in expanding its market presence, solidifying its customer base and enhancing product offerings through acquisitions. In second-quarter 2024, acquisitions contributed 5.7% to total revenues. In June 2024, Ingersoll Rand acquired ILC Dover, integrating it into its Precision & Science Technologies segment. This acquisition will enhance IR’s capabilities with ILC Dover’s single-use solutions for biopharma and pharma production, complementing its expertise in liquid handling technologies and positive displacement pumps.
In the same month, the company acquired Complete Air and Power Solutions (“CAPS”), Del PD Pumps & Gear Pvt Ltd. (Del Pumps) and Fruvac Ltd. (Fruitland Manufacturing). The acquisition of Del Pumps will complement IR’s expertise in mission-critical pumping solutions across life science, food and beverage and medical industries. The buyout will augment the precision technologies business within the Precision and Science Technologies segment.
With the CAPS buyout, IR will be able to expand its product portfolio for its clients while the acquisition of Fruitland will augment its capabilities in the mobile vacuum market. Both companies will be integrated into the Industrial Technologies and Services segment.
The acquisition of Friulair (February 2024) will increase the scale of Ingersoll Rand’s air dryer business and will add new chiller production capabilities, thereby boosting its Industrial Technologies and Services segment. The buyout will enhance the company’s presence across food and beverage, and pharmaceutical end markets. In October 2023, the company acquired Slovakia-based Oxywise s.r.o. and Canada-based Fraserwoods Fabrication and Machining Ltd., boosting its capabilities in high-growth sustainability end markets. Both entities have been added to the Industrial Technologies and Services segment.
Ingersoll Rand’s commitment to rewarding shareholders through dividend payments and share buybacks is encouraging. In 2023, the company paid dividends of $32.4 million and repurchased shares worth $263 million. In the first six months of 2024, it paid out dividends of $16.1 million and repurchased treasury stocks worth $135.5 million. In April 2024, Ingersoll Rand’s board of directors approved an additional $1 billion increase to the share repurchase authorization. This is incremental to the amount remaining on the existing $750 million authorization.
Strong free cash flow generation supports the company’s shareholder-friendly activities. In 2023, free cash flow jumped 65% year over year to $1.3 billion. In the first six months of 2024, free cash flow increased 8.8% year over year to $382.4 million.
In the past year, this Zacks Rank #3 (Hold) company’s shares have gained 26% compared with the industry’s 17.9% growth.
Image Source: Zacks Investment Research
However, cost inflation is weighing on Ingersoll Rand’s operations. The company’s cost of sales increased 11.2% year over year in 2023 due to the rising cost of raw materials and component parts. Selling and administrative expenses rose 16.1% in 2023. Also, in the second quarter, selling and administrative expenses increased 8.4%. This drove selling and administrative expenses as a percentage of revenues by 20 basis points to 18.9%.
The company has been witnessing high costs associated with investments in areas like demand generation and digital and other IT-related investments. It expects to incur corporate costs of $170 million in 2024. Escalating costs are a pressure on the bottom line.
Ingersoll Rand has considerable exposure to regions outside the United States. Its significant international presence exposes it to political and economic disruptions, which can directly affect its profits. Also, the company is exposed to headwinds arising from unfavorable movement in foreign currencies. In 2023 and second-quarter 2024, adverse foreign currency movements hurt sales by approximately 1% and 0.9%, respectively.
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Flowserve Corporation (FLS - Free Report) currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
FLS delivered a trailing four-quarter average earnings surprise of 18.2%. In the past 60 days, the Zacks Consensus Estimate for Flowserve’s 2024 earnings has increased 3.8%.
Crane Company (CR - Free Report) presently carries a Zacks Rank of 2. The company delivered a trailing four-quarter average earnings surprise of 11.2%.
In the past 60 days, the Zacks Consensus Estimate for CR’s 2024 earnings has increased 2%.
Ferguson Enterprises Inc. (FERG - Free Report) currently carries a Zacks Rank of 2. FERG delivered a trailing four-quarter average earnings surprise of 2.6%.
In the past 60 days, the consensus estimate for Ferguson’s fiscal 2025 earnings has remained steady.