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Industrial manufacturing company Ingersoll Rand (NYSE:IR) met Wall Street’s revenue expectations in Q1 CY2025, with sales up 2.8% year on year to $1.72 billion. Its non-GAAP profit of $0.72 per share was 2.1% below analysts’ consensus estimates.
Revenue: $1.72 billion vs analyst estimates of $1.72 billion (2.8% year-on-year growth, in line)
Adjusted EPS: $0.72 vs analyst expectations of $0.74 (2.1% miss)
Adjusted EBITDA: $459.7 million vs analyst estimates of $473 million (26.8% margin, 2.8% miss)
Management lowered its full-year Adjusted EPS guidance to $3.34 at the midpoint, a 2.9% decrease
EBITDA guidance for the full year is $2.1 billion at the midpoint, below analyst estimates of $2.14 billion
Operating Margin: 17.6%, in line with the same quarter last year
Free Cash Flow Margin: 13%, up from 5.9% in the same quarter last year
Organic Revenue fell 3.9% year on year (-0.8% in the same quarter last year)
Market Capitalization: $30.43 billion
Company Overview
Started with the invention of the steam drill, Ingersoll Rand (NYSE:IR) provides mission-critical air, gas, liquid, and solid flow creation solutions.
Sales Growth
A company’s long-term performance is an indicator of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, Ingersoll Rand’s 4.2% annualized revenue growth over the last five years was sluggish. This wasn’t a great result compared to the rest of the industrials sector, but there are still things to like about Ingersoll Rand.
Ingersoll Rand Quarterly Revenue
We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Ingersoll Rand’s annualized revenue growth of 8.3% over the last two years is above its five-year trend, suggesting some bright spots.
Ingersoll Rand Year-On-Year Revenue Growth
We can dig further into the company’s sales dynamics by analyzing its organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, Ingersoll Rand’s organic revenue averaged 1.7% year-on-year growth. Because this number is lower than its normal revenue growth, we can see that some mixture of acquisitions and foreign exchange rates boosted its headline results.
Ingersoll Rand Organic Revenue Growth
This quarter, Ingersoll Rand grew its revenue by 2.8% year on year, and its $1.72 billion of revenue was in line with Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 3.7% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and indicates its products and services will see some demand headwinds. At least the company is tracking well in other measures of financial health.
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Operating Margin
Ingersoll Rand has been an efficient company over the last five years. It was one of the more profitable businesses in the industrials sector, boasting an average operating margin of 13.8%. This result isn’t surprising as its high gross margin gives it a favorable starting point.
Looking at the trend in its profitability, Ingersoll Rand’s operating margin rose by 13 percentage points over the last five years, as its sales growth gave it operating leverage.
This quarter, Ingersoll Rand generated an operating profit margin of 17.6%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.
Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
Ingersoll Rand’s EPS grew at a spectacular 16.2% compounded annual growth rate over the last five years, higher than its 4.2% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
Ingersoll Rand Trailing 12-Month EPS (Non-GAAP)
Diving into the nuances of Ingersoll Rand’s earnings can give us a better understanding of its performance. As we mentioned earlier, Ingersoll Rand’s operating margin was flat this quarter but expanded by 13 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.
Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.
For Ingersoll Rand, its two-year annual EPS growth of 13.1% was lower than its five-year trend. We still think its growth was good and hope it can accelerate in the future.
In Q1, Ingersoll Rand reported EPS at $0.72, down from $0.78 in the same quarter last year. This print missed analysts’ estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street expects Ingersoll Rand’s full-year EPS of $3.24 to grow 6.7%.
Key Takeaways from Ingersoll Rand’s Q1 Results
We struggled to find many positives in these results as its EPS and EBITDA missed Wall Street’s estimates. It also lowered its full-year earnings guidance. Overall, this was a weaker quarter. The stock traded down 5.5% to $72 immediately following the results.
Ingersoll Rand didn’t show it’s best hand this quarter, but does that create an opportunity to buy the stock right now? We think that the latest quarter is just one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
