Shares of industrial goods manufacturer Ingersoll-Rand Plc (IR) scaled a new 52-week high of $64.94 on Dec 23, before closing the trading session a notch lower at $64.47. Despite its strong price appreciation, this Zacks Rank #3 (Hold) stock still has enough fundamental strength to drive it upward. The stock is currently trading at a forward P/E of 20.0x and has long-term earnings growth expectation of 14.3%.
Growth Drivers
Ingersoll recently entered into an agreement to acquire FRIGOBLOCK – one of the largest refrigerated transport companies in Europe, for €100 million or approximately $122.9 million. FRIGOBLOCK manufactures and supplies transport and vehicle refrigeration units for customers in Europe. The acquisition broadens the portfolio of transport refrigeration products and services in Europe and strengthens key research and design capabilities for Ingersoll. This acquisition is expected to be accretive to Ingersoll’s earnings per share, EBITDA margins and return on invested capital (ROIC) in its first year of operation.
Ingersoll continues to focus on improving the efficiencies and capabilities of products and services within its core businesses after the divesture of the commercial and residential security 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
Other stocks in the industry that warrant a look include EnPro Industries, Inc. (NPO), Illinois Tool Works Inc. (ITW) and DXP Enterprises, Inc. (DXPE), each carrying a Zacks Rank #2 (Buy).
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