Ingersoll Hits 52-Week High - Analyst Blog

Shares of industrial goods manufacturer Ingersoll-Rand Plc IR scaled a 52-week high of $63.69 on Jun 19, before closing the trading session a notch lower at $63.63 for a healthy one-year return of 44.7%. 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 19.9x and has long-term earnings growth expectation of 15.3%.

Growth Drivers

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.

Earnings estimate revisions for second-quarter 2014 have moved up in the last couple of months, reflecting bullish sentiments on the stock. For the ongoing quarter, Ingersoll projects revenues to increase by 4%–5% year over year. Adjusted earnings from continuing operations are expected to be in the range of $1.09 to $1.13 per share, with reported earnings in the range of $1.08 to $1.12. The current Zacks Consensus Estimate for second-quarter 2014 is pegged at $1.10.

Other Stocks to Consider

Stocks in the industry that warrant a look include IDEX Corporation IEX, Illinois Tool Works Inc. ITW and Nordson Corporation NDSN, each carrying a Zacks Rank #2 (Buy).