The New Ingersoll Rand Debuts Under Challenging Circumstances

While the combination of the former Ingersoll Rand’s non-HVAC businesses and Gardner Denver into the new Ingersoll Rand (IR) makes plenty of sense on a long-term basis, this is a tough time for this new company to make its debut. A host of short-cycle manufacturing end-markets are under significant pressure now, not to mention commodity markets like mining/metals and oil/gas, and acyclical businesses like medical/life sciences aren’t big enough to pick up the slack.

Ingersoll Rand should see its short-cycle business pick up around year-end, leading the way into a solid recovery in 2021 and beyond. Upstream oil/gas is going to be weaker for longer, I believe, but it’s now a smaller part of the overall business. On top of that are meaningful synergy and cost reduction opportunities. The “but” at the end of the road is valuation. While I do see a path to adjusted operating margins in the mid-teens and similar levels of FCF margin, the share price seems to already reflect that and I’m concerned the company could execute quite well objectively but still underwhelm from a relative price performance perspective.

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The New Ingersoll Rand Debuts Under Challenging Circumstances