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What's in Store for Ingersoll (IR) this Earnings Season?

Industrial goods manufacturer Ingersoll-Rand Plc IR is scheduled to report second-quarter 2017 results before the opening bell on Jul 26. In the last reported quarter, the company’s adjusted earnings beat the Zacks Consensus Estimate by 4 cents. Ingersoll has a healthy earnings surprise history. In the trailing four quarters, it topped earnings estimates thrice with an average positive earnings surprise of 3.6%.

Let’s see how things are shaping up for this announcement.

Key Factors to Consider

Ingersoll is focusing on improving efficiencies and capabilities of products and services within its core businesses after the divesture of the commercial and residential security businesses. On the other hand, strategic acquisitions have served as growth drivers, supplementing the company’s organic growth. Furthermore, Ingersoll is likely to achieve steady improvements in operating profitability with new product developments, investments in IT platform and enhancement of channel services footprint and product management capabilities.

The company has a solid foundation of global brands and a leading market share in all major product lines. The geographic and industrial diversity, coupled with a large installed product base provide 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 in strengthening its market position and achieving high productivity.

However, Ingersoll continues to reposition its portfolio to focus on high-barrier markets. While such efforts are encouraging, they involve upfront costs which will lead to earnings dilution in the near term. Consequently, the company is continually under stress to maintain profitability through stringent cost-cutting measures. Additionally, its international operations are subject to economic risks. Results of the operations may be adversely affected by changes in economic conditions and changes in local government regulation.

Also, its significant international presence exposes it to political and economic disruptions, all of which can directly impact its profits. This gives rise to some concerns regarding its growth potential in the coming quarters, in the light of macroeconomic and geopolitical turmoil that is afflicting some economies.

Earnings Whispers

Our proven model does not conclusively show that Ingersoll is likely to beat earnings this quarter as it does not possess the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below:

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because the Most Accurate estimate and the consensus estimate are both pegged at $1.46. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Ingersoll’s Zacks Rank #3 when combined with a 0.00% ESP makes an earnings beat unlikely this quarter.

Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Stocks to Consider

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Rockwell Automation Inc. ROK, with an Earnings ESP of +0.61% and a Zacks Rank #3.

Allegiant Travel Company ALGT, with an Earnings ESP of +0.34% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Alaska Air Group, Inc. ALK, with an Earnings ESP of +0.40% and a Zacks Rank #2.  

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Ingersoll-Rand PLC (Ireland) (IR): Free Stock Analysis Report
 
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