Stifel Upgrades Ingersoll-Rand To Buy, Sees 18% Upside

In a report published Monday, Stifel analyst Robert P. McCarthy upgraded the rating on Ingersoll-Rand PLC (NYSE: IR) from Hold to Buy, while initiating a price target of $77.Analyst Robert McCarthy pointed out that 35 percent of Ingersoll-Rand's revenues were tied to the US nonresidential construction, which appears to be in the midst of a "3 year + upcycle." The company is well positioned to take advantage of this recovery, McCarthy added."About 66% of IR's overall $10 billion Climate business is derived from North America. Through the company's HVAC businesses and Thermo King, we think IR is poised to continue to take advantage of strong secular trends within the North American nonresidential construction market," the report stated.Ingersoll-Rand's near-term fundamentals remained strong, driven by strong management execution. The company expects to see "mid-single digit growth in U.S. residential and commercial HVAC markets in 2015," but is likely to exceed these estimates, the Stifel report mentioned.The company is expected to continue posting solid margins in Climate. Ingersoll-Rand has raised its adjusted operating margins guidance for 2015 and 2016 to 12.5-13.5 percent and 13-14 percent, respectively."IR's oil & gas exposure is manageable, given its position among Industrial peers. Also, with only ~15% of total revenue derived from Asia and about 7% from China, we think exposure to Chinese markets in terms of recent weakness and volatility, will not be a significant issue for the company," McCarthy wrote.