Industrial goods manufacturer Ingersoll-Rand Plc (IR) is scheduled to report fourth-quarter and full year 2013 results before the opening bell on Feb 11. In the last reported quarter, Ingersoll’s adjusted earnings beat the Zacks Consensus Estimate by 6 cents. Let’s see how things are shaping up for this announcement.
Key Factors in the Fourth Quarter
On Dec 2, Ingersoll completed the spin-off of its commercial and residential security businesses into a separate standalone company. Ingersoll will not have any stake in this new company, which has been listed on the New York Stock Exchange as Allegion plc. Ingersoll shareholders received one Allegion share for every three Ingersoll shares held at the close of business as of the record date of Nov 22, 2013.
The spin-off is expected to unlock value for the company’s shareholders. With the spin-off, Ingersoll will be able to strengthen its focus on its core businesses. The restructuring initiative is aimed at driving its growth initiative, implementing a new business operating system and reducing complexity and overhead cost to improve margins.
Ingersoll has recently increased the quarterly dividend from 21 cents to 25 cents per share. The increased dividend is payable on Mar 31, 2014 to shareholders of record on Mar 14. Additionally, Ingersoll approved a new $1.5 billion share repurchase program, which is likely to start in the second quarter of 2014, after the completion of its existing $2.0 billion share repurchase program.
Ingersoll has consistently returned significant cash to its shareholders through share repurchase and dividends. In the last three years, the company has returned more than $4 billion to shareholders.
Earnings Whispers?
Despite some brownie points, our proven model shows that Ingersoll is likely to miss earnings because it does not have the right combination of two key ingredients. That is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank of #1, 2 or 3 for this to happen. This is not the case here.
Negative ESP: The difference between the Most Accurate estimate and the Zacks Consensus Estimate stand at -3.33%. This is a leading indicator of a likely negative earnings surprise for shares.
Zacks Rank #3 (Hold): Ingersoll’s Zacks Rank #3 when combined with a negative ESP makes surprise prediction difficult. Note that the Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.
Other Stocks to Consider
Here are other companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Cablevision Systems Corporation (CVC), earnings ESP of +33.33% and Zacks Rank #3 (Hold).
Waste Management, Inc. (WM), earnings ESP of +1.67% and Zacks Rank #3 (Hold).
Trinity Industries Inc. (TRN), earnings ESP of +2.13% and Zacks Rank #1 (Strong Buy).
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