Investopedia: Ingersoll-Rand Getting The Squeeze

Federal government officials may be eager to talk down the risk of inflation in the United States, but plenty of industrial companies are seeing it. Maybe there is a statistical argument somewhere that validates just ignoring the price of inputs like oil, gas, coal, and metal, but they are very real factors for companies like Ingersoll-Rand (NYSE:IR). With rising commodity input costs, a stagnant construction market and a mix of businesses weighted towards the later part of the economic cycle, this industrial conglomerate is struggling to match the performance of some of its industrial comparables. 

A Mixed End To The Year
Ingersoll-Rand did end the year on a positive note from a revenue perspective. Total sales grew 13% (as reported) and exceeded the high end of the analyst estimate range. Growth was also relatively well balanced, with climate (which is more than half of revenue) up 16%, industrial technologies up 17%, residential up 12% and security down 1 percent. 

Odd as it may seem, that extra revenue was not all good news. The company had aggressively reduced capacity during the recession and seems to have been caught off guard when demand rebounded. Gross margin declined ever so slightly, and that was arguably a solid result given the input cost pressure. Operating expenses, though, were more problematic. While it is true that operating income rose 38% as the company reported it, that was nevertheless short of expectations and forecasts. Investors should also note that there was noise in the operating income numbers (adjustments, "one time expenses" and so on) that can complicate the year-on-year comparisons. (For more, see Zooming In On Operating Income.)

At the bottom line, though, the company did not meet the Street's profit goals and management's guidance gave no particular comfort that things would be getting better soon. 



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